Small businesses are obviously in the business of making money. But when a small business is first trying to get its operation off the ground, it’s not uncommon at all for it to rack up at least some debt.
In fact, the average small business has accumulated almost $200,000 worth of debt. In between finding an office space and stocking up on inventory, a small business owner can easily dig themselves deep into debt.
Climbing out of business debt isn’t always easy for small business owners. But it’s possible to do it as long as you take the right steps and do everything in your power to turn your business into a success story.
Here is a comprehensive guide on how to get a grip on your business debt and get rid of it once and for all.
Sit Down and List All Your Individual Debts
Most business owners are aware of the fact that they have some business debt that they need to deal with. But not all of them know how much debt they have or where all the debt is coming from.
Join Our Small Business Community
Get the latest news, resources and tips to help you and your small business succeed.
Start things off by sitting down and generating a list of all your individual debts. From debts worth just a few hundred dollars to debts worth tens of thousands of dollars, all of your debts should be included on this list.
The list will give you some idea of just how bad your business debt is. It’ll also help you stay organized as you strive to knock your debts down one by one.
Decide How Exactly You’re Going to Deal With Your Debts
Once you have a long list of your business debts down on paper, decide what you’re going to do to begin eliminating some of your debt. Are you going to:
- Use the “debt snowball” method and pay your debts down one at a time from the smallest debt up to the biggest debt?
- Use the “debt avalanche” method and pay your debts down one at a time from the debt with the highest interest rate to the one with the lowest interest rate?
The last thing you want to do is begin blindly throwing money at debt. There should be a plan of action in place before you get to work.
Make Sure You’re Working With a Budget for Your Business
Ideally, your business should already have a budget in place that takes your monthly income and expenses into account. But if you don’t, now is the time to create a budget for your business.
If you’re not using a budget, it’s going to be almost impossible to find ways to free up extra income to pay down debt. It’s also going to be hard to see some of the areas in which you could scale back expenses to save money every month.
Find Ways to Cut Your Business Costs to Free Up Money
As we just alluded to, scaling back your expenses when you’re trying to pay back business debt is one of the keys to getting your company out of debt. You should cut as many unnecessary costs as you can to make your debt repayments more manageable.
This might mean looking around and finding more affordable vendors than the ones you’re using now. It might also mean changing your approach to things like marketing.
Something has to give when it comes to your spending. You’re not going to be able to continue spending money the way you are now and pay down your debt quickly.
Figure Out How to Start Boosting Your Business Sales More
Cutting your company’s expenses will help you save enough money to pay back some debt. But if you want to supercharge your debt repayment efforts, it’s going to require you finding ways to boost your sales and bring in more money.
Are there new products that your company can start offering to generate higher sales? Can you think of any services that your company can extend to people to get them more interested in your business?
Sit and brainstorm some of the ways in which you can give your sales a big boost in a relatively short period of time. If you’re able to do this, you might be able to bring in the money you’ll need to make your business debt a thing of the past.
Avoid Falling Too Far Behind on Any Debt Payments
When you look at all your business debt right now, does it overwhelm you?
You might have so much debt that you don’t see a way that you’re going to be able to pay it off. You might also be behind on some of your debt payments.
If you ever find that you’re not able to make debt payments on time, you should reach out to your lender to let them know and try to work out some kind of deal with them. Lenders are often willing to work with borrowers to come up with a repayment plan that works for everyone.
Taking this approach is much better than falling behind on debt payments, ignoring the issue, and falling even further behind. If you choose to do that, you could end up in an even bigger hole than before.
Learn more about what you should do if you fall behind on debt payments so that you’re able to steer clear of a situation that could threaten your entire business.
Eliminating Your Business Debt Is Possible
You might not be able to see the light at the end of the tunnel right now. But believe us: it’s there!
You can pay down all your business debt if you’re willing to work hard and be strategic about it. As long as you have a plan for your debt, you should start to see at least a little bit of it disappear in a short period of time.
Need more help managing your business debt? Check out our blog to get more great advice.