It can be difficult to run your business on a daily basis, while planning for growth at the same time. There’s a certain truth to the saying that you’ve got to spend money to make money, but if you can’t cover your expenses every month (i.e. rent, payments to suppliers, salaries, etc.) you’re going to find yourself in some serious hot water.
Even if you’re doing everything right, loans and debts are an almost inevitable part of running and growing your own company. The question is, how can you manage your debt so that it doesn’t spiral out of control?
The key is to be intentional and take charge of the situation from the very start.
1. Stay organized
It’s easy to picture your debt as one big, messy cloud, looming over your business. When you break things down into individual debts, everything will feel so much more manageable. Make sure that you know exactly who you owe, how much and when payments are due. Then, you can start to prioritize and plan.
2. Always review your cash flow
If your monthly income and expenditure have become unbalanced, take a step back to look at where the extra expenses are coming from. Then, you can adjust your budget to plan for the future without compounding your debt further.
3. Cut unnecessary costs
Clear your debt more quickly by identifying areas for potential (and fast!) savings. Do you have any unnecessary expenses that aren’t exactly necessary to the running of your business?
For example, are you paying for subscriptions or leasing equipment that you could live without for a while? Or, can you attempt to negotiate lower rates or deals from suppliers, or get better rates by switching suppliers? You could even think about joining with other small businesses to order in bulk, for better value.
Rent is likely to be one of your most significant costs, so it’s worth considering whether you can downsize your workspace, even just temporarily, to a coworking space. You could also explore the option of sub-letting some of your space to another individual or small company to make some of your money back.
4. Increase your revenue
Boost sales in the short-term by running special promotions or discounts on your most popular products or services. If you have any unpaid or outstanding invoices, be sure to chase those down. Moving forward, consider offering a discount to those who pay upfront so that your accounts receivables stay healthy. This will allow you to make bigger payments each month and clear your debt sooner.
5. Work out a payment plan
Oftentimes, creditors are open to putting a (realistic) plan in place that allows you to clear your debt. The only way to find out if this is an option for you is to open the door to the conversation and assure that you’ll both get what you want out of it.
Some credits might offer flexible repayment terms, such as extending your loan over a longer period of time, in order to reduce your monthly payments and accumulating interest. You might also be able to work out a loan consolidation, which groups several loans together into a single monthly payment. This is much easier to manage and incorporate into your budget – and much less intimidating!
The bottom line
Be proactive, and be strategic. It’s not necessarily about stripping your costs down to the bare minimum in order to clear your debt as fast as possible. It’s all about managing your company’s finances and structuring your debt in a way that is smart and sustainable.
You want your business to grow and thrive, and that doesn’t come cheap. But, with some strategic planning and negotiation, your business debt doesn’t have to hold you back. Rapid Finance offers fast decisions and can deliver a variety of financing solutions within three business days.