Are you struggling to keep up with your business debts? If so, you’re not alone. A growing number of businesses are finding themselves in similar situations. However, there are steps you can take to reduce your debt and get back on track.
Below, IVA Plan breakdown some tips on how to reduce your business debts. Alongside helping struggling business owners get their finances back on track, IVA Plan provides free advice on everything from council tax to removing a CCJ from your credit file.
Check out the top tips below:
Review Your Business Debt Situation
Any business owner knows that debt is a part of running a business. But when business debt starts to pile up, it can be difficult to know where to turn. The first step to reducing business debt is understanding where your company stands. Gather all your financial statements and calculate your total debt. This will give you a clear picture of what needs to be addressed. Once you have a handle on your business debts, you can start working on a plan to pay them down. If you’re not sure where to start, talk to a financial advisor or accountant. They can help you develop a strategy that fits your business’s needs.
Create a Debt Reduction Plan
Once you know how much debt your business has, it’s time to start working on a plan to pay it off. Begin by looking at your business expenses and see where you can cut costs. Do you need that office space? Are there any unnecessary expenses that can be eliminated? Reducing your business expenses will free up more cash that can be put towards paying down debt.
Prioritize Your Debts
Not all business debt is created equal. Some types of debt, like business loans, tend to have lower interest rates than credit card debt. When you’re creating your debt reduction plan, prioritize the debts with the highest interest rates first. This will save you money in the long run and help you get out of debt faster.
Negotiate with Creditors
If your business is struggling to make payments, reach out to your creditors and try to negotiate a new payment plan. Many creditors are willing to work with businesses that are having financial difficulties. If you can’t reach an agreement with your creditors, consider talking to a debt settlement company. They may be able to negotiate a lump sum payment that’s less than what you owe.
Consider a Debt Consolidation Loan
If your business has multiple debts with different interest rates, a debt consolidation loan can help simplify your finances. With a debt consolidation loan, you’ll take out one loan to pay off all your other debts. This can help you save money on interest and make it easier to keep track of your payments. Just be sure to shop around for the best rates and terms before you commit to a loan.
Use a 0% Interest Credit Card
If you have good credit, you may be able to transfer your business debt to a 0% interest credit card. This can give you some breathing room to pay off your debt without accruing more interest. Just be sure to read the fine print before you transfer your balance. Some cards charge high fees for balance transfers and have other restrictions that can make them difficult to use.
Get Help From Family and Friends
If you’re having trouble securing a loan from a bank or other lender, you may be able to get help from family and friends. Just be sure to draw up a contract that outlines the terms of the loan and make payments on time. Missing a payment could damage your relationship with the person who lent you the money.
Sell Unneeded Assets
If your business has any assets that it doesn’t need, sell them and use the money to pay down debt. This can be a good way to raise cash quickly and get rid of unwanted items. Just be sure to consider the tax implications of selling business assets before you make any decisions.
Cut Your Losses
There are some business debts that just can’t be paid off. In these cases, it may be best to cut your losses and declare bankruptcy. This will allow you to get out from under the debt and start fresh. Just be aware that bankruptcy can have a major impact on your credit score and make it difficult to get new loans in the future.
Seek Professional Help
If your business is in serious financial trouble, you may need to seek professional help. Talk to a financial advisor or accountant to get started on a plan to get out of debt. They can help you develop a budget, negotiate with creditors, and find new sources of funding. Getting professional help can be a major investment, but it may be worth it if it helps you get your business back on track.
Following these tips can help reduce business debt and improve financial standings. Reviewing business expenses, cutting costs where possible, and negotiating with creditors are all excellent ways to free up cash flow. In some cases, it may be necessary to seek professional help to get the business back on track. But taking action to reduce business debt is an important step in ensuring long-term success.