Many businesses have debts, such as money owed to suppliers or loans to repay. As long as debts are managed well, however, they do not have to threaten the financial health of your business.
Here are five ways to make sure debt doesn’t overwhelm your business:
1. Review your loans
If you have more than one loan, consider consolidating them into one larger loan. This can often result in lower monthly repayments.
If any loan is at a high interest, see if you can find one at a lower interest rate to replace it.
Before you consolidate your loans or transfer to lower interest loans, check on your credit report to make sure that there are no negative factors that could make it difficult to get a new loan.
2. Negotiate with your suppliers
If you are keeping up with your payments to your suppliers, you could be in a good position to negotiate better rates for the goods or services that they supply. They may have deals for bulk purchases of items.
If you are a long-standing customer who places large orders, you may be able to negotiate more favourable credit terms. If payment is due 30 days after delivery, a good relationship might help you get that period extended.
3. Increase profitability
Profitability is not just about increasing revenue, but also looking at where to make cost savings. If you have unused space at your premises, consider renting off this space to other businesses to increase your income.
Recruit new customers through targeted marketing and social media campaigns, and network in the hope of finding business opportunities. It all helps you bring in the funds you need to reduce the weight of debt on your business.
4. Prioritize payments
If you have a number of debts, decide which are priority. Any credit cards that charge a large interest should be paid off as a priority, followed by any that you have given a personal guarantee for.
5. Get outside help
Talk to your bank manager about your debt issues. The bank does not want your business to fail as they make money from operating your account, so it might be able to offer suggestions to help keep your business profitable.
Consider using an outsourcing accounting service who are experts in cashflow and debt management. At Sollertia, we will be able to create a plan for dealing with your business debt.