There are many reasons that small businesses go into debt. In fact, some debt is usually necessary to start up a business. However, what you don’t want is for your small business to get buried under so much debt that it becomes unprofitable, or so much in debt that bankruptcy becomes your only option. Last year a total of 37,771 businesses filed for bankruptcy, which was up from 29,920 filings in 2015. So, before it gets that bad, here are some ways that you can start to get your small business out of debt.
Cut Unnecessary Expenditures
Every business is going to need paper clips and pens. We’re not suggesting that you cut anything that is crucial to the functioning of your small business. However, if you sit down and really look at where your money is going, there are usually a few areas that can be pruned. The trick is to look for things that aren’t really paying off. Sit down and ask yourself, “do I really need it?” Do you really need all that office space? Could you move to something smaller? Do you really need all the communication systems you have? If it’s too difficult to do on your own, or you think you’re too close to the situation to be really objective, there are professional debt-management companies that can help you make the tough calls.
Consolidate Your Loans
Often, when you start a new venture, business loans can help you launch. While start up costs are a normal part of opening a new small business, it can become problematic when you find you need to take out multiple loans. It can become easier, and more tempting, to just take out another loan to cover your costs. If you find that you have too many loans and the payments and interest are nibbling at your profits, consolidating your existing loans can be a good way to go. The best option, if you can swing it, is to consolidate shorter-term loans into a longer loan, hopefully with a lower interest rate.
Make Sure You’re Getting Paid
People get behind on payments for a lot of reasons. If you’re like most people, then you likely know how it feels to get behind on things and have to struggle to make ends meet. As a small business owner, it’s understandable to want to work with people on their payments for your products and services. However, this can easily get out of hand. If your small business is struggling financially, one of the best ways to start digging yourself out is to make sure you’re getting paid. It’s time to start following up more on past due payments. It also might be time to start considering how to make your products or services more attractive to potential customers. Try offering a discount for loyal, repeat customers. Also look at your advertising strategy and make sure there is no obvious demographic you’re missing out on that could help your business grow into all of the potential you saw for it when you first opened your doors.