How to Handle Business Debt Effectively

Running a small business is no walk in the park. Between juggling operations, managing employees, and trying to keep customers happy, you've got enough on your plate. But throw in a little thing called debt, and things can get downright chaotic. So, let's cut the crap and get real about handling business debt like the boss you are.

Understanding Your Debt Situation

First things first, know your enemy. It's easy to lump all debt together and panic, but not all debt is created equal. You've got your good debt (typically tied to investments that will bring future returns - think business loans for expansion) and your bad debt (usually a high-interest debt that doesn't contribute to growth...ahem, hello, credit cards).

Make a detailed list of all your debts, including interest rates, monthly payments, and due dates. This will help you prioritize which debts to tackle first. Typically, you want to focus on high-interest debt because it's the sneaky little bastard that grows the fastest.

Create a Solid Repayment Plan

Having a plan is crucial. Just like you wouldn't start a business without a business plan (at least we hope not), you shouldn't approach debt without a repayment plan. Here's a no-nonsense approach to get you started:

• Prioritize Your Debts: List your debts from highest to lowest interest rates. Pay off the high-interest ones first while making minimum payments on the rest.
• Negotiate with Creditors: Don't be afraid to pick up the phone and negotiate. You'd be surprised how often creditors are willing to lower interest rates or extend payment terms if you're proactive and honest about your situation.
• Consider Debt Consolidation: If juggling multiple payments is driving you nuts, consider a debt consolidation loan. This can simplify your payments and potentially lower your interest rate.
• Automate Payments: Set up automatic payments to avoid late fees. Just do it. Future you will thank you.

Cut the Fat

No, I'm not talking about your post-pandemic waistline (though we all feel it). Take a hard look at your business expenses. Are there subscriptions or services you're paying for but not really using? Trim those unnecessary expenses and redirect that money toward paying down your debt.

Increase Your Revenue

This might sound obvious, but it's worth saying: making more money can help you get out of debt faster. Look for ways to boost your revenue, whether it's upselling to current customers, launching new products or services, or exploring new markets. Get creative. 

Seek Professional Help

If you're feeling overwhelmed, don't hesitate to seek professional help. A financial advisor or a business consultant can provide valuable insights and strategies to manage your debt more effectively. Just make sure they're legit and not some fly-by-night operation that will leave you worse off.

Maintain a Healthy Cash Flow

Managing debt isn't just about paying off what you owe; it's also about making sure you don't end up in the same situation again. Maintain a healthy cash flow by keeping a close eye on your accounts receivable and payable. Don't let clients take their sweet time paying you. Implement clear payment terms and follow up diligently.

Learn from Your Mistakes

Debt can be a great teacher if you let it. Reflect on what got you into debt in the first place and learn from those mistakes. Maybe it was poor financial planning, overestimating revenue, or underestimating expenses. Whatever it was, use that knowledge to make better decisions moving forward.

Celebrate Your Wins

Lastly, don't forget to celebrate your wins, no matter how small. Paid off a credit card? Cheers to that! Successfully negotiated a lower interest rate? High five! Each step towards becoming debt-free is a step in the right direction.

Final Thoughts

Handling business debt doesn't have to be a soul-crushing experience. With the right mindset and strategies, you can turn things around and come out stronger.

And if you need a little help along the way, we’ve got your back. We can provide working capital, including consolidation loans, in less than a week to help you get back on track. CLICK HERE to schedule a call with our team and discuss your options.