Seven Sure Ways of Eliminating Small Business Debts

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Seven Sure Ways of Eliminating Small Business Debts

The one sure way of tanking your business is by accruing debt. Nothing tears down a business more than constantly being in debt. True, sometimes it is necessary to take out loans in order for your business to stand. However, debts tend to take out so much from your business that eventually, it seems like there is nothing that is coming from the business.
Well, there are a few sure ways of not only getting out of business debtbut also ensuring that you do not get back into debt again.

  1. Compile Your Debts

The first step you should take in getting your business out of debt is compiling a list of all debts accrued. This list should contain every detail of every debt: the principle amount, the interest, the total expected, the lender, the payment period, as well as any other terms involved. This will help you have a clear picture of the magnitude of debt you might be in.

  1. Reevaluate Your Budget

As is with all things in life, without a clear plan, you can end up spending a great deal of money on things that are completely unnecessary. This is why you need to sit down and do a full audit of what is spent on what, what is really necessary, and what is not. You will be shocked at how much money you are able to spare. Use this money to carry out step number three.

  1. Come Up with A Payment Plan

Having a clear picture of the debts and the dates due, you can now prioritize the debts according to the urgency of repayment. If, for instance, you have a loan due for payment in the next three months, and yet another due for repayment in the next year, you need to start with the one due in a couple of months, no matter the amount needed. This saves you from landing in the wrong books of credit bureaus.
Now, the best way to come up with a payment plan is by understandingthe amount of profit that comes in per month and determining a figure that can go into repaying that loan. Take into account such factors as business emergencies and ensure that you do not use all the profit to pay back the debt.

  1. Reinvest in Bits

It is very tempting to focus on repaying debt and forget that your business still needs to run. The only way you can ensure that you pay back the debt in full in due time is by ensuring that your business stays afloat. As such, now that some of the profit goes into your repayment plan, ensure that you spare some to reinvest into the business. Come up with a percentage per profit earned in a month and strictly use it to reinvest into the business. This will help keep your business relevant and current and help inmaintaining and earning a new client base.
For instance, if you make a profit of $300,000, define a percentage like 25% (which would be $75,000 in this case) to be reinvested into the business. This can be in the form of upgrades, a facelift forthe business, or simply restocking inventory. This ensures that, in the eventuality that some debts are not fully paid, you have something to fall back on. It also makes sure that the business does not go belly up during the repayment period.

  1. Pick A Cheaper Loan

At this point, you have two choices to make, one of which is to pick a bigger debt that has a lower interest rate. You may not think this could work but hear us out.
The idea here is to consolidate all your current debts and turn them into one. At this point, we assume, you have already started paying off some of the most pressing ones andreducing the amounts. Once that figure is clear, then look for a lender that will lend you the full amount needed. Use this to pay back the smaller debts, not only buying you more timebut also enabling you to focus on one nation21loans and lender.
In most cases, you will find that the bigger debt will cost you a smaller interest rate than the many small ones, saving your business money.

  1. Renegotiate Your Loans

If the above idea does not sitwell with you, then you can opt to renegotiate the terms of your loan with your lender in terms of the time given, the interest rates, or even the principle. Do some research to understand what your lender can offer, then try renegotiating your initial terms. The principalwill havechanged if you have already started paying back some of the initial loanplus interest. You can then renegotiate on the basis of the current remaining debt, giving you a chance at paying less interest.

  1. Up Your Business Game

Do not let any business opportunity pass you by. Invest in any possible way that will help you increase your income. Increase prices of goods or services that are in high demand or reduce the prices of less-demanded ones to ensure you sell everything you can. As you are looking to pay off your lenders, go after those who owe youto increase your business. Add services that complement the ones you are already offering. For instance, if you run a bookstore, you can add a coffee area and then add a pastry option to draw in more clients, as well as increase your revenue.
At the end of the day, the more you make, the faster you are able to pay off your debts and live debt-free.
The one virtue that will keep you on course is discipline. In order for you to pay offyour loans, you have to bedisciplinedenough to ensure that you do not overspend, use up all your profit, or miss your repayment plan. You have to remain focused on the target and use all possible ways to keep your business afloat. These steps are guaranteed to ensure that you get your business out ofdebt, and if kept up, they can help you avoid debt altogether.