What comes into your mind when you think about debt? For most people, debt has a negative connotation. But for a majority of small business owners, taking on debt is a necessity. Henderson business loans, business credit cards, and a business line of credit can help you cover the costs of hiring new employees, make payroll, purchase new equipment, and pay for daily expenses.
However, the problem with debt is that too much of it can cause problems with cash flow. And sometimes, it can even put you out of business. According to a study by Experian, an average small business owner has an accumulated debt of $195,000. However, if you want to prevent your business from drowning in debt, here are four steps you can take that will help you.
1. Shorten Your Client’s Payment Periods
Late-paying clients and long repayment terms can cause cash flow problems. If this is the case, you might want to revise your payment terms. Instead of giving clients a 90-day repayment term, you can shorten it to 30 days. You can also offer discounts for early payments or have late payment penalty.
2. Negotiate with Creditors
Have you ever had a client who borrowed money from you but took too long to pay it back? Most business owners count this type of debt as a loss. Therefore, if this client contacts you many months later and offers to settle the debt for a lower amount, you’d most likely agree to it. If you have an overdue debt you can’t afford to pay in full, negotiate with the creditor and offer to settle. Most lenders are willing to work with you and accept a lesser amount.
3. Look at Your Credit Report
Checking your credit report is one of the first things you should do if you want to get your business out of debt. It’s important to understand the facts in order to create an effective plan on how to tackle your debt. It also helps to analyze your personal credit score along with your business score. A number of factors can affect your business’ credit score, such as:
- New credit inquiries
- Amount you owe
- Payment history
- Mix of accounts
Your business credit score measures the creditworthiness of your company and it shows the number of accounts you have open. You’ll be able to see the debt you have accumulated, enabling you to create a plan to rid your business of its debt.
4. Cut Down Expenses
Cutting down on expenses is also an effective way to get out of debt. There are many different ways you can minimize business expenses. For example, you can sell office supplies and equipment you don’t use. You can also opt to lease or buy used equipment instead of purchasing new ones, and move to a smaller office with lower rent. Lastly, you can split costs and share resources with similar businesses.
5. Consider Debt Refinancing
Debt refinancing is another way to get your business out of debt, especially if you have good credit. By refinancing your debt, you can take out a lower-interest loan to repay it. You can also apply for SBA loans, a business line of credit, and other types of small business loans.
Henderson Business Loans – Small Business Loans for You
If you want to discover how Henderson business loans can help your business, the finance experts at SMB Compass can help. Simply give us a call today at (888) 853-8922 or email us at firstname.lastname@example.org