One of the most potent mechanisms to fund your business is by incurring debt. Most companies and governments take loans all the time. However, if your business fails to perform well, you can find yourself in a position that you can’t handle the current debt. The following are things you can do if you find your business in such a situation.
Contact Late-paying Customers
Most businesses deal with customers who take time to pay for products and services. The fact is late payments are problematic as they mess up with the business’ budget.
You should make a list of your outstanding business invoices. After that, start contacting all the customers on the list. You can start with those who have not resolved their payment for the longest time. As you make the call, politely nudge them to clear their debts.
In case you are lucky, some customers may pay up while others will still hold out. If you have a massive invoice that you are not sure when it will be paid, you can sell it and get immediate funds. The one who will purchase it can go on and contact your customers to pay them. The chief disadvantage of this option is that you will get less money than the one on the invoice. This is not good for business.
When you realize your business is in debt, you should also know that your reputation is at stake. So, it would be best if you did all that you can to maintain a good reputation that will not spook investors in the future. Instead of ignoring your debt, you should contact creditors. Most debt collectors are willing to negotiate. In some cases, you can get the entire amount reduced, whereas in other cases, they will be ready to extend the payment grace period.
To get a good deal, you can consult a debt settlement company. It will contact creditors on your behalf and set up a negotiation meeting. In case the negotiation succeeds, you will pay a more affordable reduced debt amount eventually.
The debt adjustment will offer you the services at a fee that you will agree upon. Before you consult, it would be wise to familiarize yourself with the pros and cons of debt settlement. This will enable you to make a more informed decision.
Delay or Cut Expenses
If you are in debt, it means that your business may not function as planned. Therefore, you should revisit the budget and cut costs. This is among the most challenging decision to make when managing a business, but it is necessary when debt is strangling your business.
Expenses cuts can comprise of both small and significant changes depending on your current financial situation. For instance, if you owe a considerable debt, you can move your business to cheaper premises to save thousands.
Moreover, you can save by delaying expenses such as purchasing new office equipment or hiring a new employee. You should only spend money in the business only when necessary, such as when paying employees. The amount you save use it to reduce the amount of your debt.
Sell Off Assets
In case you have assets in your business premises that you no longer use, sell them to get extra cash. The assets can include anything that is not critical for the business’ survival, such as fax machines or printers that you rarely use.
In case you are finding it difficult to sell your assets, you can lease them at a fee. This can apply to the equipment you are likely to use in the future. Moreover, you can use other creative mechanisms like exchanging something you own with one that you rent. The money that you will earn when you sell or lease, use it to lower your debt.
Debt is easy to acquire but very difficult to lose. If not well managed, it can damage or permanently cripple a business. In case you find your business in debt, try numerous means to pay up. If you cannot afford to pay for everything, seek help from a debt settlement company. After you manage to get out of the debt, work to avoid being in a similar situation.