How to Help Your Business Get Out of Debt
Running a business - any business - requires a lot of money. Most people start a business with the intention of earning more than they spend, but the truth is that it can, and does, take years for a business to turn a profit. What’s more, it may take longer than expected for prototypes, minimal viable products, and samples to be ready to show investors to actually get their hands on capital. Revenue from sales can also take longer once the business is fully operational and there are always bills to be paid right from day one. So how can your business get ahead, get out of debt, and continue to be prosperous before profitability? You need to work to get your business out of debt as fast as possible.
Business owners often work to pay day-to-day bills, keep loans and interest payments at bay, and focus on investing in marketing their products so they can turn a profit, but there are other ways to create room for money in your business. Paying down debt, for example, can free up a lot of your monthly expenditures over time and can save you thousands of dollars in interest payments along the way. Of course, finding alternative business funding options besides traditional bank loans are much more popular these days than they were years ago. That’s because business owners are learning about the lower interest rates, better advantages and perks, and the networking that comes with doing business outside of a banking institution. So the first thing you need to do to start wiping out your business debt is take a look at where you are banking and shop around for lower interest rates on all of our business loans and accounts.
The next thing you need to do is look at what you have purchased that is not necessary for the overall operation or success of your business. For example, if you run an online website selling products that are drop shipped from another part of the country, you don’t need a 10-office suite. You probably don’t even need 5 offices. Most online retailers startup running a tight ship and that means running a skeleton crew. If you can downsize your space and avoid hiring more people than are necessary, you can redirect that extra capital into your loan accounts to get rid of the debt. A few hundred dollars a month might not seem like a big deal, but it makes all the difference in the world to a new operation trying to keep its head above water and not get bogged down with ridiculous debt payments every month. Sure, you can claim the loan interest, but wouldn’t it be better to not have any loans at all? It’s amazing when your business can run debt free. It means you can make decisions on the fly, change at the drop of a hat, or move in a direction because you don’t have investments in your previous ways of doing things.
Another thing you can do to help reduce your business-related debt is to consolidate your existing loans into a loan with a lower interest rate. If this isn’t possible because you haven’t been operational for long enough or because you don’t have enough equity in your property or business, consider consolidating some of the loans at least. You might not like the idea of managing several loans, but if they are saving you money - literally, thousands of dollars in some cases - it’s worth the time and energy to maintain them over the life of the loan. Any money you save as a result of consolidation should be thrown right back into the loan payments to help pay down the debt that much faster.
Finally, you can sell the business. If running your business and servicing the debt is becoming too much for you to handle, you always have the option of selling the business, bringing on a partner to cover the debt, or looking for investors to pay it down so you can get back to doing what you do best. It’s not the ideal situation, but you might be so stressed out from running a business just to pay debt that you might not have even considered it was an option. Give yourself some time to mull over the options and do what is right for your business and your life. It’s easy for business owners to carry on down a path of resistance because they made a commitment to the business and their customers, but that cost is great in some cases and you need to make sure you are doing what is right for you, your health, and your bottom line.