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When you run a small business, taking on debt is sometimes necessary. After all, debt can help you get through a sales slump, finance a new growth avenue, or purchase more inventory to keep up with holiday demand. But holding onto too much debt for too long can overwhelm your small business and keep you from meeting your financial goals.
If you’re concerned about your small business debt, one of the best things you can do is talk to a finance professional. An accountant can help with a wide range of financial tasks, from payroll to tax planning, which can facilitate the repayment of your debt and promote good financial wellbeing. In the meantime, Betty and Rose Refour share some great tips to help you get a better handle on business debt!
Safeguard Your Personal Finances
Before you worry too much about your business debt, make sure your personal finances are secure. If you’re running your business as a sole proprietorship, you may be personally liable for any financial troubles facing your business. Shield your personal assets by structuring your business as a separate legal entity. For example, forming an LLC is a great way to improve your financial standing by minimizing your personal liability and generating special tax savings.
Increase Your Revenue
Since you will need more money to pay off your debts, try looking for ways to raise your revenue. For example, you could create a promotion to generate sales from existing customers, offer coupon codes to new shoppers, or launch a referral program. If you decide to offer a discount, be careful to avoid discounting your products so much that it hurts your ability to generate additional revenue. In fact, you might be able to increase your prices without driving off customers! Focus on creating incredible value for your customers and you should be able to increase your rates without hurting your sales.
Additionally, make sure you have a plan in place to deal with the unfortunate circumstance of customers not paying you. There are some things you can try, like adding late fees, as well as helping to set up payment plans. Make sure you take advantage of a free invoice template to help you save money while maintaining records.
Find a Loan with Better Terms
If increasing your revenue isn’t enough to get your debt paid down, consider consolidating your debt into a lower-interest loan. Taking out a larger loan with more favorable terms and using the money to pay off all your other debts can help you get a better handle on things. Instead of keeping track of many different loan balances and monthly payment requirements, you will only need to remember to make one payment every month. And with the opportunity to lock in a loan with a better interest rate, you’ll be able to funnel less money into interest payments and more into paying off your balance.
Take Advantage of Support Programs
One of the best ways to control debt is to avoid it in the first place. Fortunately for small business owners, there are plenty of resources available for entrepreneurs who need financial assistance. Whether you’re looking to get through a seasonal sales dip or you need money to take your business to new heights, a government grant might cover your bases. The benefit of grants is that you don’t have to pay the money back. You do, however, have to navigate a lengthy grant application process.
The U.S. Chamber of Commerce breaks down the various small business grants that you can receive, including those reserved for businesses in specific industries. Take a look at your options and consider applying for a grant that you think would best fit your business. Keep in mind that you can also take advantage of tax credits and government loans if you can’t find a grant that works for you.
Expand Your Awareness
Pulling your business out of debt is a great feeling. The last thing you want is to experience this again, so put safeguards into place to ensure you stay in the black. Again, an accountant will be an invaluable resource in helping you keep your books on track. Familiarizing yourself with well-rounded accounting software will make a difference too. If you want to learn more about accounting, and how to take your business to new heights, consider online courses to boost your knowledge and skill set. An MBA can even be the perfect choice, providing you with a wealth of knowledge and business connections.
Eliminating business debt won’t happen overnight, but with these tips, and a little patience, you can winnow down your debt into nothing. The important thing is to make a plan and stick to it, and never lose sight of your business’s true potential.
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