Managing debt is a tricky business. If you don’t know how to handle it, you could find yourself or your business in serious trouble.
However, the right way to manage your debt with minimal risk and stress, can go a long way towards keeping your company afloat. Here are some tips on how to best manage your business debt, so that you can focus on growing your business instead of having to worry about managing debt.
Understanding Your Financial Situation
One of the most important things you can do to manage your debt is to understand your financial situation. What is the amount of debt that you owe? Who do you owe it to? Do you have any cash flow left over each month?
Once you have a firm understanding of where you stand, then it’s time to develop a plan for managing your business debt. You should determine which debt has the highest interest rate and start tackling it first, paying off as much as possible before moving on to other debts. It’s also worth noting that if some of your creditors are more lenient than others, be sure to take advantage of this. It might be advantageous to pay off smaller or less severe loans first, then work on larger ones later.
Getting a Grip on Your Debt
1) Find out what your business is worth.
Start by figuring out exactly what your company is worth. When you owe a debt, you might be tempted to inflate the value of your company to make it seem like you have more assets than liabilities. But this could lead to serious penalties from the government and your lender if they find out that you’re lying about the value of your company. It’s not worth risking: know the true value of your company before talking with creditors or negotiating a deal.
2) Figure out how much time you have before you need to repay the debt.
If you can, try to negotiate a timeline for repayment with your creditors. You might be able to swap a secured asset for an unsecured one with lower rates, or offer collateral on top of paying off the balance in full as long as it has little chance of declining in value over time. This will help make sure that if something happens and someone defaults on their payments, they won’t take your business down with them.
3) Limit the number of new debts incurred by the business until existing ones are paid off.
Owing debt is already stressful enough without having more piling up on top of it! Limit new debts when possible so that if things go south, at least some debt will be cleared up before others come due.
Setting Goals
When it comes to managing debt, a well-defined budget that is adhered to is essential. You should also have systems in place so that you know where the money coming in and going out of your business is going. This enables you to see what needs to be changed or improved to allow your business to grow.
Ask for Help
Sometimes it’s a good idea to get a professional perspective of you business debts, to be able to gain advice, and move forward with your business. There are many reputable companies that can offer business debt advice, and often have services to help manage and worth through your debts and plan for your financial liabilities.
Conclusion
If you’re like most small business owners, you know that your company is your baby. That’s why you are going to do everything in your power to keep it afloat and protect it from harm. But sometimes, the responsibilities of running a small business can cause a lot of stress and distraction, which can lead to making some poor decisions.
The best thing you can do is to get a grip on your debt and make sure it doesn’t spiral out of control.
