Five Strategies To Get Your Small Business Out of Debt
Lance Cody-Valdez
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Five Strategies To Get Your Small Business Out of Debt
According to experts, small businesses should aim to keep their debt levels at no more than 30% of their business’s capital. If your business consistently exceeds this, it may be time to create a plan to reduce your debt. The following tips will help:
1. Use accounting software to take stock of your debt and keep to a budget
Before you can set any debt reduction goals, you need to know your starting point. List all your business debts and organise them by interest rates and monthly payments. This will help you decide which debt(s) to tackle first.
Next, determine how much money you have, or will need to raise, to start paying down your debt. Create a budget. This is where accounting software comes in useful. Explore accounting software options and look for solutions that offer real-time balance sheets and cash flow insights, so you can monitor how much your business is bringing in. When you understand exactly how much your revenue is, it’ll be easier to create a budget and get out of debt.
2. Explore ways to increase your sales
If your debt is threatening to sprial out of control, the chances are you won't have a lot of extra cash lying around to begin paying it off. One way to raise additional funds is to increase sales. If you’re struggling to come up with ways to do this, consider going back to school to update your skills in corporate finance, marketing, strategic planning and statistics. Enrolling in an online Master of Business Administration programme can help you learn the latest techniques for boosting sales and enquiries. You can complete the programme at your own pace, which allows you to take care of your business and your family at the same time.
3. Research grants
Increasing your sales will probably take some time. Whilst you establish opportunities to earn more money, consider looking at ways to get other people to fund you, such as via business grants. You’ll need a solid business plan and a compelling grant application to get your business funded over all the other applicants to the fund. It may be worthwhile hiring a professional grant writer to assist you. Boost your chances by focusing only on grants that are specifically for companies in your industry.
4. Consider consolidating your debt
Consolidating your debt can make it easier to manage, because you’ll have just one payment to budget for, instead of multiple payments that may be due at different times. However, debt consolidation could ultimately increase the cost of your debt if you’re unable to obtain a loan at a lower interest rate than what you’re currently paying.
You may want to consult a professional before you decide whether debt consolidation makes sense for your situation. Look for a financial advisor that specialises in helping small businesses; they’ll be able to provide useful advice about reducing your debt and improving the financial health of your enterprise.
5. Spend less money
Another way to generate cash for paying off debt is to cut your spending. Consider downsizing to a smaller office to save on rent and utility costs. If your business is small enough, you may be able to save money by working from your home or via a co-working space instead of leasing an office.
Consult an accountant about ways you could reduce your tax burden, such as changing your business structure to one that has tax advantages.
Getting out of debt is not an easy task for any business. However, the long-term success of your company may depend on it. These steps can help you on your way to good financial health.
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