A small business can quickly find itself overcome by crippling debt. This is much more possible in the aftermath of the recession and the still turbulent economic times.
Whether through mismanagement, taking up too many orders that the business fails to meet, debt accumulation and failed expansion moves, a previously healthy small business can quickly be drowning in debt.
Recognizing and appreciating the problem at hand early enough is important to protect your business and its assets, your credit score and to solve the debt burden without resorting to extreme last resort measures. Here are a couple of things you can put in place to avoid further drowning in debt and stabilize your business.
1. Get expert financial advice
There are a number of not for profit organisations which help small businesses stay afloat and manage these debts. If you have a budget you can also hire a certified financial professional or accountant. The aim is to have someone go through your business operations, income, expenditure and debts and advice based on proper knowledge of your situation, the law and regulations. You get expert advice and even help in restructuring your operations and a guide in selecting your options especially when it comes to dealing with creditors.
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2. Talk to your creditors early enough
Your creditors are the ones who can easily drive your business to the ground. Earn their trust by reaching them before things get worse and inform them of your plans to restructure payment whether it is long-term or early payment in case of a refinancing option. Inform them of plans you are making to see their debts paid and many creditors will be willing to understand since they want their debt paid without resorting to a court process. This buys you time and peace of mind instead of looking for excuses and being surprised by auctioneering acts.
3. Considered consolidating your debt
If you are struggling to meet the bare minimum payments of each of your debts you may want to consolidate it into one loan paid for longer. This pays off your immediate debts and leaves you with one loan to pay. Before you pick this option ensure the savings made having included the loan fees and rates as well as any early payment penalties warrant such a move.
4. Cut down on your expenditure and operation cost
To avoid sinking further in debt cut down on any cost that does not form core function of the business. You can close new branches that are yet to pick up and even reduce number of employees.
Every decision made during this period should be well thought and informed by expert advice. You should aim at reducing debt and increasing the capacity of the business to operate.
Patrick Ward is a legal researcher specializing in finance, loans and debt analysis, and bankruptcy law. He has a decade of experience in analyzing the legalities involved in the dynamics between local and global financial institutions. He is also passionate in helping individuals overcome their financial challenges. Follow on twitter @blgbankruptcy