Many small businesses have debts. In fact, since covid-19 struck, the number of small businesses in debt has skyrocketed. If yours is one of the many businesses with debts to manage, here are some simple things you can do to make it easier.
Organize Your Debt
The first step towards managing your small business’ debt is to define it properly. Create a spreadsheet that details exactly what you owe and to whom. Not only will this ensure that you have identified all the sources of debt your small business is currently facing, but it will also make it much easier to prioritize your debts.
As well as recording the amounts that you owe to your creditors, you should also note who is first in line to receive repayments and the repayment terms for each.
Assess Your Current Cash Flow
Paying off your business debts should always be a priority. However, there is no sense in crippling your business operations trying to pay your creditors. Conducting a thorough audit of your current cash flow situation will tell you how much money you have available to put towards your debts.
If you have agitated creditors pressuring you to start repaying them, the best approach is honesty. If you don’t have enough funds available to offer lenders, it’s better to discuss this with them than avoiding the issue altogether. Lenders will appreciate your honestly and help put you on a payment plan that works for you.
Start with the Smallest Debt
Paying off your smaller, more manageable debts makes more sense than trying to tackle more significant debt. Paying off your smallest debts first will get the ball rolling and free up funds, which you can then put towards your more significant debts.
Clearing any debts from your records will make your business more financially stable and enable you to obtain funding more quickly should you need to apply for further financial aid. Psychologically, removing these smaller debts can also significantly reduce the stress and anxiety you feel due to owing money.
Reduce Your Expenses
The less money you are spending, the greater your profits will be. Streamlining your spending will also demonstrate to your lenders that you are taking measures to address the debts you owe to them and are working towards being able to pay back what you owe.
If your business spending is out of control and you are spending money frivolously, your creditors may interpret this to indicate that you aren’t serious about clearing your debts. Quantify your business expenses and look for anything you can do to reduce or eliminate them.
Negotiate with Your Creditors
The worst thing you can do is to avoid talking to your creditors about the money you owe; you should engage with them throughout the process. If you are struggling to pay off debts, most of your creditors will be willing to discuss a payment plan; they would rather receive something than nothing.
Any debt can be difficult to deal with psychologically, whether it’s personal or business-related debt. But managing small business debt doesn’t have to be difficult. Stick to the advice above, and it will help you bringing down your business debt and making it more manageable.