According to the United States Small Business Administration, some of the reasons small businesses struggle with debt include lack of money, poor credit management, and use of business funds for personal needs. Most of these are problems that could be dealt with easily if one gets to learn more about the things that guarantee stability for a small business. However, many entrepreneurs don’t have the time and skills to conduct thorough audits that could help to reveal things they are doing wrong that lead to the accumulation of debt. If you are among those struggling to do away with small business debt, here are few tips you could rely on to free your business.
Rework your budget
The first thing you need to look into before you even proceed to review your debt is the current financial position of the business. Start by reviewing the budget to see if you have been pumping more than is required into some sections of the business, and this is easy to notice if you are spending a lot on a process whose yields when analyzed amount to a loss.
Identify your sources of income, the costs the business has to cover, and variable expenses so you can weigh between choices while optimizing the budget to make it friendlier. With the additional amount that is raised through savings after optimization, the business can get rid of the need to borrow and you could also easily use the surplus amount to pay off what you already owe suppliers.
Increase customer sales
Apart from slashing costs, you need to also look at your sources of revenue particularly customer sales. The option you have in this case is to find ways through which you can raise customer sales in a bid to boost revenue. There are several tricks you could apply including offering mark-downs and discounts on various products. Most importantly, you can ramp up on accounts receivables by ensuring you keenly follow up on late payments. Through this effort, you will raise additional revenue that will be useful when you want to settle debt quickly.
Negotiate with lenders and creditors
Another way you could deal with debt is by negotiating with creditors and lenders for better repayment terms. This might look tough to deal with considering you have to present valid and believable reasons as to why you need the agreement revised. If you think it is difficult to bear with the idea, you could work with debt settlement experts like Nationwide Debt Reduction Services.
Settlement experts negotiate on your behalf for better terms and they are more likely to help you get a good deal than when you choose to pursue the process. A hardship plan also comes with benefits where you are allowed to submit a lower amount every repayment period, which means you will not face penalties as a result of failing to pay on time. On this you need to draft a hardship letter enumerating why you qualify for the arrangement. You may be asked to provide previous and current tax returns, income statement, and bank account statements.
Consolidate loans
Debt consolidation is also a way you could lower your interest rates while paying down your debts faster. Instead of dealing with different loans that have varying interest rates, you could bring all of them together into a pool. This means your interest rate will be lower and you can repay all the loans together faster. To come up with a viable plan for consolidation, you are advised to consult with experts so you can choose a strategy that will make things to work out well.
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