When you’re staring down the barrel of high-interest loan debt, it can be difficult to imagine a financially healthy future for your business. The last thing you want is to continue adding to your existing debt, so the only thing you can do is face it head-on and figure out how to manage it. Once you do, you’ll be able to take the necessary steps in getting rid of it completely.
You can start by looking to the future, even as far ahead as retirement — let Dan Rhoads help. But of course, there are actions you can take as early as now, including the following:
Make More Money
We know, making more money is easier said than done. However, it’s a necessary step in paying down your debts faster. Find a way to boost your sales, whether it means raising your prices, offering discounts, adding new products or services, remarketing your products or services, and so on. You may also want to try strengthening your online presence by engaging with your target audience through social media channels and customer reviews.
Create a New Budget
The first place you want to look in terms of financial management for your business is your existing budget. If you’re in a lot of debt, you either don’t have a budget, or you’re doing a poor job of maintaining your current one.
Start by sifting through the past year’s financial statements, income sources, expenses, and so on. It’s a good idea, therefore, to use financial software to create balance sheets and generate financial reports that you can tailor-fit to your needs in real-time. This level of good recordkeeping lets you monitor and maintain your budget more efficiently. Further, this will give you insight into what’s working and what isn’t, so you can make better spending decisions moving forward.
Consolidate High-Interest Loans
If the biggest issue with your debt is having multiple high-interest loans that are sucking you dry, you may want to consider a debt consolidation program. If you get accepted into a consolidation program, you’ll get a new loan to cover all existing loans that apply, along with a new and usually more reasonable interest rate. This allows you to pay one lump sum each month with better terms.
“Stack” Your Loans
Alternatively, loan stacking is a method of prioritizing your loan payments by either the highest amount or the highest interest rate. Essentially, the loan that you give top priority to will receive the highest payment amount. The rest will receive their minimum payment requirements. Once the prioritized loan is fully paid off, you’ll apply the same payment amount to the next loan on the list. This process is repeated until all of the debt is paid off.
Cut Your Losses
Another way to alleviate debt pressure is by finding ways to reduce your expenses, which is really fundamental financial planning for anyone. While assessing your budget, identify the expenses that your business can live without. You can also try negotiating with vendors for better prices or inventory returns, selling equipment or office supplies, or, you can even downsize to a more affordable space.
Whatever you do, don’t let more debt accumulate — start minimizing it as much as possible by remaining in line with your new budget and ensuring that the money coming in is greater than the money owed.
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