Tips to Tackle Business Debt

 In Accounting, Finance, Small Business

Your business sales should ideally be strong enough to carry your company throughout the entire year. However, sometimes unforeseen market forces may make that impossible. There are several strategies a small business owner can take to help alleviate the situation.

Sometimes it may just be your business is very cyclical and your sales haven’t ramped up enough to tackle all the debt. Here are some tips from Steve Nicastro of NerdWallet that small businesses can consider if sales are falling short:

Create a Debt Management Plan

Take inventory of different kinds of debt the company has accrued and categorize it by interest rate and monthly payment. Payments needed may range from lines of credit to business credit cards to vendors. Some experts suggest paying the highest interest rate debt first. For new small businesses getting debt paid within the first year is important to help avoid bankruptcy.

A bank loan may ultimately be what you need. Local banks can help small business owners by providing the tools and products they need to control their finances and offer expertise when it comes time for a loan. They should be knowledgeable about the local economy and knowledgeable about the key factors for business success in your area. Here are several tips to help make working with a bank for a loan easier:

  • Be prepared to fill out a lot of forms
  • Pick a bank that’s right for you and your business
  • Do your research to see what banks in your area specialize in
  • Ask your banker and accountant for advice on how much funding to seek
  • Make sure you don’t owe taxes
  • Be ready to provide personal and business credit history
  • Submit a business plan with personal and business financials that outlines all the details on how the loan will be used

Boost Sales

Make increasing sales a priority. Dial in your online marketing efforts by reviewing your Google My Business efforts with pictures and relevant keywords. Make sure you are utilizing free profiles on Yelp, Bing, and Local.com. Hand in hand with this is getting active on social media. Engage your customers on social media with offers and reviews. If applicable, try volume discounts on large orders, which may help your business stay competitive.

Cut Expenses

Consider downsizing to a smaller office to cut rent and utility costs. Sell off any equipment and office supplies that aren’t being used frequently. Lease necessary equipment. Use your business networking opportunities to find other companies to split costs with and possibly split space with.

Act on Your Debt Management Plan

The Federal Reserve has raised interest rates in 2017, which has negatively affected credit card balances and lines of credit. Look to consolidate credit card debt by finding a business credit card promotion that offers a 0% interest time period on balance transfers. Aim to pay it off before the 0% time period is up.

Shorten Customer Payment Terms

If clients are paying late or you have a long-term payment plan, it’s time to do something about it. Change payment terms from 90 days to 30 days for new clients. Try offering an early payment discount and enforce a late-payment penalty for unpaid invoices.

Sources:  Westchester Business Journal. Pleasing the Bank. 5/2017. P. 16.

USA Today. 5 steps to digging our of business debt. 5/18/2017.

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