If you’re a small business struggling with debt it is possible to get back on track. Don’t be one of the 50% of small businesses that close down for good within 5 years – use these five simple tips to take control and start turning your debt around.
1. Revisit your budget
Only 40% of startups are profitable while 30% are continually losing money. You’re aiming to get into that 40% so start by going over your business expenses with a fine-tooth comb to identify areas you can cut waste. Switch to online accounting and a cheaper internet and mobile phone provider and drop nice to have expenses like cleaners. The short-term pain will be more than offset by long term financial health.
2. Consolidate your debt
Try refinancing your small business loan at better interest rates and with better repayment terms. Otherwise consolidate multiple small debts into one loan. You’ll reduce the number of creditors you have to deal with and may find you can negotiate much better repayment terms on a single loan. You can even apply for an unsecured Start Up loan to keep growing your business.
3. Prioritise your debts
If you’ve personally guaranteed any of your debts then make paying them off a priority – otherwise you might lose your house or car. Then pay down high interest credit card loans or try and switch debts to cards offering 0% deals before paying them off.
4. Boost your cash flow
Think about fine tuning your invoice collections. If customers aren’t paying up on time, then find ways to make repayments easier such as credit card processing with a card payment machine and a merchant account. Don’t stop promoting your business – instead use low cost marketing strategies based around email and social media. And make the most of your business assets by leasing them to offset your capital costs.
5. Communication is key
Don’t stop communicating with your creditors. Try requesting a settlement plan or a reduced one-off payment to settle the debt.
Make it clear that the less your creditors are prepared to accept, the quicker you’ll be able to pay off the debt. Make sure you can keep your end of the deal and you’ll be back in control of your finances as quickly as possible.