Business debt can cripple your business. It can make it difficult or impossible secure credit from your suppliers. It can harm your cash flow, so you cannot serve your existing customers nor expand your business into new niche markets. Keel Associates, a company that provides solutions for consumers and business owners struggling under crippling debt, often receives requests for information on how to eliminate business debt.
The following are some simple steps to help you attack and eliminate the debt.
Conduct a Strict Accounting of Your Budget
Even the smallest of businesses must take a look at every outgoing expense and all income. You will need to create a monthly budget. What is leftover can either go back into your business or must go to pay down the debt.
Use the Snowball Method
The San Francisco Chronicle recommends making larger payments on the highest interest debt first. Often, that is a credit card. Make the minimum payment on all of the other debts for a while. This will eliminate that high interest debt sooner, freeing up more funds for paying off the rest of the debt.
Close the Extra Credit Card Accounts
Close the credit card accounts with high interest rate percentages. Experian, for example, does take into account how many lines of credit you have. Too many lines of credit or credit lines that are over-extended will harm your business credit score.
Lower Your Spending
Fundera suggests thinking about subscriptions and professional organizations that you can temporarily end until you are back on your feet.
Increase Your Business Income
Many women-owned businesses today began around the Great Recession as a means of maintaining or creating an income. If you have a micro-enterprise, you might consider another income stream as a temporary means of paying down business debt.
Pay With Cash
The Chronicle suggests that you can begin to adopt a better habit of paying with the money you have on hand if you pay with cash. That will help eliminate the desire to overspend.
See if Lenders Will Reduce Interest Rates
Most of these current crop of both business and consumer credit cards come at a much higher interest rate than in the past. See if the credit card issuer will reduce the rate on the card. If you have a good payment record, they just might reduce the rate.
Consider Debt Consolidation Services
If the credit card issuers will not reduce your interest rates, and your budgeting efforts will not quickly help you eliminate the debt, it is time to consider debt consolidation services from a reputable lender. Often, debt consolidation services will not only combine your debts into one payment; but, more importantly, it will provide you that debt at a lower interest rate. With the lower rate, you can actually attack the debt and pay it down. The credit cards these days, with their exorbitant interest rates appear to be designed to eliminate that possibility.
Hire a Debt Restructuring Company
According to Fundera, if you can’t qualify for a debt consolidation loan and can’t get the credit card issuers to lower your rates, you could work with a business debt restructuring firm. They can negotiate on your behalf with your creditors. The huge caveat here is to choose a trusted company with good ratings because there are instances where such companies have just pocketed the payments you are sending them and not forwarding them to creditors.