No one plans on going into too much debt. Sometimes it just creeps up on you. It’s like those times you reach a destination in your car only to realize that you were on autopilot. How did you get there? With debt, it pays to understand how you got where you are so you don’t let it happen again.
With lenders tightening the reins on borrowers and prices for everything from materials to health care on the rise, many business owners are straining under the weight of growing debt.
Businesses can dig out of debt without filing for bankruptcy before opting for debt relief programs.
Cut unnecessary costs
If customers aren’t paying on time or your expenses are too high, consider ramping up collections efforts and ditching unnecessary expenses such as office space or costly phone you even sell off unused business equipment.
Revisit the budget
If the debt keeps piling up, then it probably means the company’s current budget isn’t really working out. Create a budget based on the business’s current financial situation. Make sure the revenues your business can more than cover your fixed monthly costs like rent and utility bills.
Prioritize debt payments
Tackle the business’s highest-interest rate debt first. If you’ve personally guaranteed any of your business’s debt–meaning, if a creditor or supplier can come after your personal assets or if you default–make sure paying off those debts becomes a high priority.
Speak with creditors
Tell your creditors(debt relief programs) the financial situation you’re in and the hardship the business is going through; then ask if they have a hardship plan that may provide better payment terms. If the creditor doesn’t offer one, request a payment plan or a reduced settlement amount.
Pay the lowest balances off first
Paying off balances feels good. If you start with one or two of your smaller debts and make the effort to pay those off.You may find that living with less debt is so satisfying that you want to keep reducing other balances.
Debt consolidation means you combine all or some of your debts into one lower interest loan. For instance, if you have a lot of high-interest credit card debt, you get a lower-interest rate card and transfer your balances onto that one. Or you put your debts on a Home Equity Line of Credit. This can be a good approach, but be sure not to charge up the old cards again. This is where the change in habits comes into play.
Contact a professional debts management company
These companies can help sniff out inefficiencies and negotiate better payment terms with creditors but keep in mind that these companies generally charge a fee and they may require you to already be in default on several loans before they’ll step in.
Every time your business is on the verge of bankruptcy always opt for the debt relief programs as there are very many companies willing to help.