Getting out of business debt is not different from pulling yourself out of your personal debt. You have to find a way to spend less than you make and put the remaining money towards your debts until they are paid off. Don’t confuse the minimalism of the goal with convenient execution, however. It’s going to take some hard work, so let’s get started.
- Check Your Credit Report
The first actual factor that you need to do is get the general status. It is impossible to address any problem, which includes debt, if you don’t have all of the information and understand the details. One unique aspect that you’ll need to do is check your credit score and reports. Even small matters intensely affect a credit score and you need to have a clear picture of what’s coming about. This means evaluating your personal credit score, in addition to reviewing your business credit score.
Even as your credit score is a quick evaluation of where you stand financially, a credit report indicates you what type of accounts you’ve open. Consequently, you can actually see what debt you’ve and start to create a plan for it.
- Snowball Debt Payments
Paying off business debt is psychological as much as anything else. In case you get aggressive with your debt, yet overlook the results, you will likely going to quit. Alternatively, if you start to gain some traction and spot some debts dissolve, the momentum builds. This is the reason many business finance experts advocate snowballing your debt payments. As a way to snowball your debt payments, you start by listing off your debts smallest to largest. With these debts ranked, you start chipping away at your debt in order. As you are undertaking your smallest debts primarily, you start to see some “success” immediately.
- Negotiate with Lenders
Occasionally it is useful to observe debt from the perspective of the lender. In case you have ever had a customer owe you money for a long time, you then realize what it is like. At some point, you count the debt as a loss and anticipate you’ll never see it. Accordingly, if that customer were to contact you after some time and offer to settle for a lower amount, you’d probably accept.
This is identical to your business debt. When you have delinquent debts that you cannot afford to pay completely, contact the lender and offer to agree to a percentage of the full amount. Most of the lenders will negotiate and accept the deal of lesser amount, just to get you off their books.
- Hire Your Partner
Unless you unexpectedly observe a massive boom in sales, you will need to find a way to reduce expenses to be able to free up cash to pay off debt. You can do this in many ways; however one smart way is to hire your partner on the board.
This approach only works in certain conditions, but can be particularly useful when it does. You find a position in your business that your partner can fill. Rather than hiring a person like you generally would, you place your partner in that position and pay a percentage of the going rate. This approach works only as a short-term solution – and also you need an agreeable partner who is willing to spend time and money for the best of the business.
- Sell off Assets
One proactive option is to sell off some of your assets to pay off your business debts. Spend some time considering your business and its processes. Are there positive matters that you could do in a different way without affecting the quality of products or services you offer? You might find that you can sell a piece of expensive equipment and purchase an inexpensive secondhand equipment.