Running a business is not risk-free. No matter what type of business you have or what size it is, you cannot run it without risk. Lending money or asking for a loan is a risk.
As a business, you have to take a loan for a lot of things. Similarly, you have to provide services to customers on a credit base. Both of these situations are unavoidable.
Taking a loan means that you will be in debt, and if you do not repay it, it can have many consequences.
For example, the lender may sue you or hire a debt collection agency to recover your losses. This is why you should manage your business debt. A business with tons of debt did not survive long in the market. So here are some ways through which you can manage your debt before everything goes south.
Here are some steps you can take to manage your debt.
Before working, find out your status
It is important that you understand your situation, which means how many debts are owed to you and from whom? If you have multiple debts, prioritize them and pay them one by one. Understand your budget as well, and explore ways through which you can pay off the loan without making a hole in the budget. Also, make sure that you do everything in your power to start paying off the debt, even if you start small. Otherwise, other companies or lenders may file a lawsuit.
Also, if you do not pay taxes or government debts, then you get ahead of everything, including your property and home.
Increase your sources of revenue
The fastest way to pay off debt is to get more revenue and cash. To do this, you have to find ways through which you can increase revenue for your business. Here are some ideas:
Offers and discounts: You need quick cash, and the easiest way to do this is to offer discounts or offers. This will appeal to tons of customers, who will pay you cash upfront for these services.
Merchandise: This will require a little investment, but consumers like to buy goods from their favorite brands. Who doesn’t own a Starbucks Cup? right? So, if your target market has scope for it, try selling these merchandise at a lower price. This can help you to get quick cash to start paying off the loan.
Raise prices: This is a bit contradictory from the first point, but if your products have a high demand in the market, it can work. This is a great way to ensure that you get a good profit on your services and pay off the loan. Even a small amount can keep a debt collection firm in your good books, as it assures them that you will pay on time.
Social Media: Start promoting your small business more on social media. These platforms can boost your sales and increase revenue which is the point. It is also inexpensive, you need the right content and consistency to get traffic through social media.
Rewriting the terms of the loan with the bank
A bank wants its money so that they are open to reassessing the terms. You can talk to the manager for:
Extending the loan repayment period. This will give you enough time to figure out a concrete plan to pay off the loan.
In some cases, banks or lenders may also reinvest the amount and accept partial payment or a lower amount.
Be active as a bank or creditors do not want to lose money, and this will happen if you go bankrupt. So, if you provide actual facts and figures, they can go for any of these conditions.
Reduce business expenses
Another way to use the reserve to cut budgets and pay back debt is to reduce business expenses. You can:
Renting a small space or working out of co-working spaces. This is a great way to cut down on rent and maintenance, and if you are not using the entire space, why pay for it?
Instead of hiring new employees at times like these, go for freelancers or consultants. But be cautious, it can be more expensive if you are not cautious.
Ask your vendors for a discount.
When cutting costs, be smart about it. Do not cut the cost of the departments that will help your business in the long term. It can be counter-productive.