If you’re trying to grow your business, you’ll know that debt is not necessarily bad. Nor does debt point to a failing business. Deliberately going into debt in order to invest in your product or strategy can encourage rapid growth, and most big corporations have gone into debt at some time or other for this very reason. But, as any small business owner understands, debt can sink a business if it is not managed in the correct way. A delicate balance needs to be struck. If your business doesn’t expand within the expected timeframe and you can’t meet your repayments, interest can erode your business from the inside out. If you’ve found yourself in deep water financially, these tips will help you manage your business out of debt and get back on track.
Get Paid What You Are Owed
Depending on what area of the economy you work in, there might be a delay between your providing goods or services to a client, and receiving the payment you are owed. For example, a copywriter might do an entire project before an invoice is raised, which then goes on the customer’s to-pay pile until they get around to paying for the work. For obvious reasons, people are more prompt with payment before they receive a service or item than they are after the fact, as there is no incentive to pay. If you work in a kind of business in which this is a reality, you understand that late payments are a hazard of the job, but left to build up, they can cause significant cash-flow problems down the line. But the other side of the coin is that late payments offer opportunities to raise funds at short notice, which is the name of the game if you’re trying to dig yourself out of financial trouble. Start by compiling a list of outstanding invoices. Then pick up the phone and start calling every client on your list, starting with the worst offenders. Expect some resistance, of course—late payers are late payers for a reason, and some of your debtors might not be in a position to pay right away,— but if you are persistent, the time you’re devoting to debt collection will start to pay off as you begin to recover some much-needed funds.
Increase Your Revenue
In some ways, regular consumer debt is simpler to pay off than the debt your business has incurred, but in other key ways, there are more options open to you as a business when it comes to paying down your debts. While an individual owing money will usually have a salaried income, with no options to increase the amount of money available to them, a business has the potential to rapidly bring in extra cash. While it might sound like a strange suggestion that a business in debt should look to bring in more money, there are ways of doing it. Sometimes you just need to see what tricks you have up your sleeve. For example, you could throw out some low-cost promos, offer limited-time deals to new customers, or reach out to new markets with coupons or sales. Your inventory can help you out, if you have a surplus, as each item in stock is money is not available in ready cash until it has sold. If you want to kill your debt, you may need to sell off some of your stock at lower rates to free up some of that money for your repayments.
Manage Your Creditors
Debt is a dirty word in many cultures and contexts, and this stigma discourages honesty when people find themselves in over their heads. Many people are understandably reluctant to admit the extent of their debt, especially in the cut-throat world of business, with competitors waiting to pounce at the first sign of weakness. You may fear that seeming successful is important to your brand, and that admitting that you’re struggling will discourage investment in your company. When your business looks like it may be going under, the last thing you want is to put investors off, but unfortunately, denying the existence of a problem often leads to your not being able to face up to it or take steps to move forward, which in turn simply compounds the issue. When the time comes to take action on your debt situation, don’t fall into the trap of keeping your mouth shut. Pick up the phone and call your creditors as soon as you can. Set up a meeting to discuss the problem and devise a way to move forward. You may be surprised by their willingness to work with you on a suitable repayment plan, but if they are not willing to budge, then at least you know which of your creditors can be relied upon to give you a little breathing room, and which will need immediate payment. And remember, if dealing with many different creditors is becoming too much for your business to cope with, debt consolidation is an option. If you do decide to this route, make sure you check loan company reviews to ensure that you’re getting the most secure loan available to you.
Photo by Dylan Gillis on Unsplash
Flog Your Assets
Modern businesses, especially online or technology companies, generally have fewer assets than the brick-and-mortar businesses that were the norm in days gone by. But even if you don’t have a ready list of assets for your business, look closer, and you will probably find that your business owns at least some things of significant value. If your business can manage without them, now is the time to sell. For example, that extra laptop might sell for enough to get one of your creditors off your back. And if you have a family car, do you really need a separate vehicle for your business? If you work in manufacturing, you might be in possession of substantial quantities of raw-materials or unused stock, which could fetch a good price on the market. Think about your building location, too. Could you sell the office space and move your headquarters home for now, until you’re back on your feet?
While debt can be crippling to a business, getting in over your head doesn’t have to be the end. These steps will help you start to move forward.
