A key skill of a successful business leader is debt management. Since it’s only natural for a small business to take on more debt as it grows, it’s very easy to unknowingly take on too much. Debt can be very advantageous if used correctly. Once it becomes excessive, however, you start to get an unnerving sense of restriction. All of your future plans now seem impossible to achieve. While debt cannot be eliminated overnight, there are several highly effective but relatively uncomplicated steps you can take to get it under control. These strategies should be continuously implemented all throughout your career, since eliminating debt is far from the only reward they offer. It turns out that most of the solutions for excessive debt are very similar to the solutions for cash flow problems in general.
Being proactive about this situation will restore the vitality business leaders need to stay competitive at all times. Here are five seamless strategies for reducing small business debt:
1. Cut Expenses
Debt makes you feel restricted. The quickest way to neutralize this feeling is to free up as much cash as possible. Step one is reviewing your financial statements to determine which expenses you can cut or reduce. If your business is in serious jeopardy, you might just want to cut or temporarily suspend any expense that isn’t absolutely necessary for your business’s day-to-day operations. As for those that are necessary for your business’s operations, see which expenses you can reduce or modify to your benefit. For example, a vendor that cannot offer a discount at this time might be able to offer a flat rate.
Even if there’s very little room for reduction in monthly bills, taking action to cut expenses is a huge step forward because, on top of your main problem, at least you can stop worrying that you are overpaying for something you don’t need.
2. Pay With Cash When You Can
This strategy is typically only advised for business leaders who aren’t looking to restructure their debt or pay off debts with a small business loan. If neither idea is on your horizon, consider changing the way you pay for certain business expenses. Since the central goal is to reduce debt, taking on more debt to make purchases will just make you more worried about having to eventually pay it off. So, if there is a business expense you can afford to pay for with cash, you might want to do this instead of using a credit card. This may not be conducive to being approved for a small business loan, since financial institutions tend to prefer borrowers with substantial cash on hand.
3. Talk To Credit Card Companies
Speaking of credit cards, the opportunity to lower interest rates on credit card debt should not be dismissed. You may be able to negotiate a lower rate if you have a strong payment history and your business is in good shape. Another option is a balance transfer, or when you transfer existing credit card debt to another credit card with a lower interest rate.
4. Eliminate High Interest Debts First
The debts with the highest interest rates should be paid off first. Start with the debt with the highest interest rate and find out how much your monthly payment is. Instead of continuing to make minimum payments, calculate how much more than the minimum payment you can afford to pay each month. Once that debt is paid off, apply the same principle to the debt with the next highest interest rate. This strategy has proven to maximize long-term savings while simultaneously speeding up the process of paying off numerous debts.
5. Take Out A Small Business Loan
Companies like United Capital Source frequently approve business loans designed to pay off existing debts. These business loans are specifically crafted to prevent repayment from impeding the borrower’s ability to pay other business expenses on time. Repayment will also be all the more easier now that you’ve taken the previous measures to cut expenses and stabilize cash flow.
If you are currently paying back multiple loans, you may be able to consolidate your loans into a single monthly payment with longer terms. Your monthly expenses will decrease without damaging your credit. It’s very important to get advice from a non-biased company because a small business loan is not always the best solution for eliminating debt. What makes this option so attractive is the fact that increasing your business’s monthly income happens to be another way to speed up the debt reduction process. You could theoretically pay off the debt as you increase sales with a merchant cash advance or revenue based business loan.
No Harm In Asking For Help
Even if a small business loan doesn’t turn out to be your best option, talking to a company like United Capital Source about eliminating debt is never a bad idea. Showing businesses how to pay off debt without impacting cash flow is our specialty. Once the problem is solved, you’ll probably be motivated to grow your business since you’re finally able to follow through on your ideas. When that time comes, you’ll know just who to call.