Be Debt Free in 5 Steps!
Debt is a powerful way to raise extra finance. But sometimes small businesses borrow too much and are not able to pay the interest payments. Too much debt can make your small business quickly spiral out of control. If you are struggling to pay your debt, then this tutorial is for you.
1.Raise additional revenue:
One may think that in order to free some cash, the only thing you can do is cut on costs. But you can also raise additional revenue through low cost promotions. A great segment of the market is price sensitive so if you run any promotion activity, like a sale or offering coupons or discounts, chances are many consumers will buy your products. This will enable you to free some cash for your debt payments.
2.Get a hold of late-paying customers:
If you offer credit to customers, chances are a few customers take eons to repay you. Compile the list of outstanding invoices and take notes as to who has not paid yet. You can then request these customers to pay you early. One way through which you can encourage prompt payment by customers is that you offer some sort of discount the remains valid for a specific period of time. For instance, you can offer your customer the respective deal; avail 5% discount on your order if you pay us within a week.
3.Cut on/Delay paying expenses:
Since now we have covered the finance section, we have moved onto the cost side. You are at a position where debt is strangling your business so chances are that you are already cutting on costs. But in reality cutting small expenses is not as effective as cutting a large expense. For instance, the rent you pay for your company’s premises may be too much for you so you may move to a cheaper place.
You can also delay your expenses. If your supplier gives you the credit facility, then you can delay paying him or ask him to increase the deadline line. However, do not go beyond deadlines as your suppliers may get annoyed.
4.Sell off your company’s assets:
Every business has assets. They are listed in your balance sheet. Assets of a small business may be very few and different as compared to a large corporation. All of these assets represent money that is tied up in your business. So if you sell your company’s assets then you can free up great amount cash. However, some assets are crucial for production and other departments. If you sell these assets then you will not be able to produce any goods. Thus, sell those assets whose harm is not substantial. Additionally, you can also look into sale and leaseback. The latter means to sell off your asset so you get money and then quickly rent it out so that you can still use those assets. You would have to regular lease payments but this method is the best of both worlds.
5.Take the help of family and friends:
Borrowing more money when you are drowning under debt may not be such a great idea. But it can be if you borrow from your family and friends. You could then be able to avoid the high interest payments of bank loans. But one big drawback of this step is that if things go wrong, you can seriously damage your ties with your family and friends. So you should treat these loans professionally. Additionally, you can establish a terms and repayment schedule and stick to it religiously so that your friendship does not get hampered.
This tutorial covered how you can your free from debt that may be strangling you. Just follow these steps and you will be debt free in no time.