Debt isn’t always a bad thing. For starters, it can help you to finance business-critical equipment and stock, all while allowing you to keep hold of the working capital you need to continue with day-to-day operations.
The trouble is that problems can arise when debt overwhelms a business. If you’re not making enough money, or are suddenly faced with a cash flow crisis, it’s all too easy to be consumed by commercial debts – but it doesn’t have to be this way.
In this guide, we explore some of the best ways to crush business debt and make it back into the black.
It may be easier said than done, but improving your revenues could be the answer to paying off your business debts.
The first place you’ll need to look is at your margins. Low margins are a pain at the best of times, but when you’re facing a cash flow crisis, they can be absolutely deadly. For some businesses this might be as simple as raising prices, but doing so could prompt existing customers to ask what’s going on, risking the reputation of your business.
An alternative option is to free up excess inventory by selling off your surplus. This is a great way to increase your cash flow and to provide you with the temporary financial boost needed to pay down your business debts.
Revise your payment terms
Generous payment terms have been the downfall of many a business. Unfortunately, this isn’t easy to change when invoices have already been sent, but you can always start afresh during the next billing cycle.
The benefits of shorter payment terms are twofold. For one thing, you’ll get the money you’re owed sooner and won’t have to worry about paying your own suppliers late. Secondly, the increased cash flow will give you more wiggle room when it comes to paying off business debts. This means you’ll be able to pay on time and avoid any of those late payment charges that can easily cause commercial debts to snowball into something far more unmanageable.
Cut down on costs
If your business is already in debt, the chances are that you’ve tightened your belt and are only spending on the things that you absolutely need. That being said, reducing your costs even further could make all the difference to your debt recovery efforts.
This is where creating an incredibly thorough budget really comes in handy, because you’ll be able to see where each and every penny is going. It’s this granular level of detail that makes all the difference when you’re trying to deal with debt, and it could save you from missing out on savings that might otherwise be overlooked.
Consolidate your debt
If you find yourself scrabbling to repay multiple trade creditors, consolidating your business debt could be the best answer. The process involves taking out a separate loan to repay all of your other debts, rolling together your existing liabilities into one and making your job that little bit easier.
The benefits of consolidating business debt can be huge, and it’s so easy to do when you can borrow money online. With a debt consolidation loan, you could end up paying less in interest while avoiding the complexities of having to repay multiple creditors at different times of the month.
All in all, consolidating your debt could make it easier to deal with your business’s financial situation – allowing you to continue trading and making the money needed to survive.
The bottom line
Whatever situation you find yourself in, it’s important to remember that there are always options available. From seeking out more favorable repayment terms to consolidating your debts with a handy loan, business debt doesn’t have to be problematic – and by using these strategies, you could pave the way to a more financially stable future.