Business debt is one of the many things a businessperson has to juggle. However, if mismanaged or ignored, debt can seriously impact your business and personal prospects.<\/p>\n
Here are 15 pointers that will help you take control of your business debt.<\/strong><\/p>\n Your business can be affected by many factors and not all of them can be\u00a0in your control. Issues along the credit chain, delayed payments from customers, altered government regulations, socio-economic changes, natural calamities etc. can all affect your business or revenue flow.<\/p>\n As a business owner, you have to be alert to the external variables<\/strong> \u2013 that is, factors other than what\u2019s happening under your roof. Calmly assess the ways<\/strong> in which you can address the situation and work out possibilities<\/strong> to best mitigate the issue.<\/p>\n Not only will this affect your credit score; but it will also make sourcing loans a lot more difficult and expensive.<\/p>\n If you are funded by private lenders or peer-to-peer (P2P) platforms, you need to maintain trust. Missing payment deadlines with vendors and other business associates could also hamper your potential to get good business deals and affect goodwill.<\/p>\n If you are leveraging your business with plastic, avoid late payment fees and interest charges. Most credit cards charge between 36% and 48% as interest, which can be back-breaking for a small business.<\/p>\n You can also use your credit cards to save! You know the pain of business travel costs right? Book hotels, flights etc. at great deals. Here’s how\u00a0Live From A Lounge has been enabling smart travelling; one loyalty point at a time<\/a>.<\/p>\n Repaying lien-based debt and higher-interest loans should be your priority.<\/strong><\/p>\n In case of default, you could end up losing business and\/or personal assets. You may have sought financing multiple times for various purposes \u2013 funds for business expansion, brand building, stop-gap arrangement or cash flow management. These loans would be of varying amounts and different interest rates. Consolidating them would be a good thing.<\/p>\n The interest outflow on small loans may not pinch much, but in the long run, these could add up to a large amount. Keeping track of small loans can also be a headache. Use a small portion of your cash flow to pay off these loans or look for interest-free loans from family and friends.<\/p>\n By taking a loan to pay off other loans, you can consolidate your debt with one or two creditors. You may also be able to negotiate better rates of interest and payment terms.<\/p>\n Just remember, this is a temporary fix. Do not get in deep waters!<\/p>\n Debt coverage ratio (DCR) is a common benchmark to assess the creditworthiness of a borrower and determines the basis of the interest component and loan tenure.<\/p>\n You need to\u00a0push for higher revenues, while simultaneously reducing the debt burden.\u00a0Look for small changes that can help improve efficiency in business. Better planning systems<\/a> and improved resource allocation can help save time and cost.<\/p>\n Small businesses tend to work on minimal resources; still, a penny saved is a penny earned.<\/p>\n See if you can cut down on power bills or reduce office overheads.\u00a0It will help if you can operate out of a smaller place or a cheaper location.<\/p>\n Consider buying used machinery; it will work out much cheaper than buying new and can free capital for better utilization. But do make sure productivity and maintenance costs aren\u2019t adversely affected.<\/p>\n Related read:\u00a06 Secrets to Reduce Online Shipping Costs for Your Small Business<\/a><\/strong><\/p>\n<\/blockquote>\n Improper material management can put a strain on your financial resources. Excess inventory not only blocks funds but also increases holding costs and added risk of loss via damage.<\/p>\n Creditors\u2019 interests are literally and figuratively aligned with yours. They do not want your business to fail.<\/p>\n See if you can negotiate better terms \u2013 say, marginally reduce interest rates or improve terms of repayment.<\/p>\n Request longer duration on payment terms with your vendors, which will give you ample time to move funds around. Conversely, ask for early payment discounts. Even a marginal discount from a vendor can add directly to your bottom line<\/p>\n A shorter payment cycle from customers can significantly boost your cash flow and improve your ability to pay off debt. Consider adding late payment charges on outstanding invoices.<\/a><\/p>\n If an asset is not performing as expected or is expensive to operate, look to liquidate and better deploy those funds.<\/p>\n Pitch your business to family and friends for an interest-free loan. There are also online portals that help raise funds for fledgeling businesses at low or no interest rates.<\/p>\n Check out our free online course on “How to get funding for your business”<\/a> on mojoVersity.<\/p>\nAlert, assess, and act on your business debt<\/h2>\n
Here are some tips to help you manage your business debt<\/strong><\/h3>\n
Avoid missing payment deadlines\/EMIs<\/strong><\/h2>\n
Maintain goodwill<\/strong><\/h2>\n
Optimise credit cards<\/strong><\/h2>\n
Prioritise payments<\/strong><\/h2>\n
Strike off small amounts<\/strong><\/h2>\n
Refinance your debt<\/strong><\/h2>\n
Boost productivity<\/strong><\/h2>\n
Cut costs<\/strong><\/h2>\n
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Optimise inventory<\/strong><\/h2>\n
Negotiate with creditors<\/strong><\/h2>\n
Negotiate with vendors<\/strong><\/h2>\n
Negotiate with customers:<\/h2>\n
Liquidate assets<\/strong><\/h2>\n
Raise interest-free loans<\/strong><\/h2>\n