A loan or debt is the last thing any business owner wants to face, but unfortunately, it is a part of running a business. No business can succeed without enough finance, and to get finance, most businesses have to take out a loan or debt at some point. There are two types of business debt: secured and unsecured. Secured debt is when the lender has some security, such as your house, which they can claim if you don’t repay the debt. Unsecured debt is when the lender doesn’t have any security and can only claim the debt from your business. There are many ways to pay back your business debt, but not all are quick or easy. If you want to know about some quick ways to pay off your business debt, here are some epic hacks that will help you do just that:
Refinancing is taking out a new loan to pay off an existing loan. You can do it for various reasons, but one of the most common is getting a lower interest rate. If you have the best credit card score, you can qualify for a lower interest rate and save money on your monthly payments. On the other hand, you may also consider taking investments on a profit ratio. Suppose a person is running an area rug business. He should look for someone interested in investing in this venture. It will help to pay off the debt as well.
Get a Loan
Another way to pay off your business debt is to get a loan from a family member or friend. It may be a great option because you may be able to get a lower interest rate or even a 0% interest rate. Draw up a contract so that everyone is clear on the loan terms. At the same time, you can also try to get a small business grant. The government offers grants to small businesses to help them grow and create jobs. To find out if you qualify, visit the Small Business Administration website.
Create a Budget
Budgeting is essential to keeping your business afloat. Make a list of all your income and expenses to know exactly where your money is each month. Check where you can cut your expenses. You may make some tough choices, but it will be worth it in the long run. Also, try to reduce your overhead costs as much as possible. Moreover, avoid incurring new debt if at all possible. The more you stay within your means, the easier it will be to get out of debt.
Consolidate Your Loan
Another option is to consolidate your debt. It means taking out a new loan to pay off multiple existing loans. It may be a good option if you can get a lower interest rate on the new loan. You can also extend the repayment period, which will make your monthly payments more manageable. Suppose you are running a home decor business. You may take another loan in the name of exporting high-quality hand-woven rugs. It will also be easy to pay off the rug loan once you get orders from international buyers. And it’s also an easy way to grow your business. So you will not only take a new loan but also expand your existing venture.
Create a Debt Reduction Plan
List all of your debts, regardless of interest rate. Then, attack the smallest debt first while still making minimum payments on your other debts. Once a debt is paid off, you can apply that money to the next debt on your list. It is called the “snowball” method, and it can be very effective. It is also very satisfying to see those debts start disappearing. Moreover, this plan will force you to be disciplined about not adding any new debt.
Set Up a Debt Payment Schedule
Sit down with all of your paid bills and create a schedule for when each one is due. Make sure to include the minimum payment amount. Then, set up reminders for yourself either through your phone or a physical planner. That way, you’ll always know when a payment is due and can avoid any late fees. You may also automate your payments through your bank’s online bill pay feature. The payment schedule will help you stay on track. Select a date and time for each week or month when you will sit down and make all of your payments.
Talk to Your Creditors
Talk to your creditors if you struggle or find it hard to make your payments. They may be willing to work with you by reducing your interest rate or extending your repayment period. It is especially true if you’ve been a good customer. Don’t be afraid to ask for what you need. In addition, most banks offer some business credit counseling services. They can help you develop a debt repayment plan. It will give you some extra time to get your business back.
Sell Unnecessary Assets
Do you have any assets that you no longer need? If so, consider selling them off to help pay down your debt. It includes office furniture, equipment, or even your company vehicle. Every little bit helps! Also, avoid taking on new debt while trying to pay off existing debt. You can free up some cash flow toward your debt by selling the unneeded assets. You may also consider leasing equipment instead of buying it outright.
Make Minimum Payments
Paying in small increments may be the best way to go. It helps you free up some cash flow to reinvest it back into your business. Try to find ways to make more money to put more towards your debt. Also, consider summing up small amounts regularly to make a dent in what you owe. Decide a time at which you must pay some amount. It could be every day, every week, or even every month. You can also check for financial ways to make your payments more manageable. See if you can negotiate better terms with your creditors, such as a lower interest rate. The key is to make it easy to make your payments on time.
Develop a Plan to Increase Your Income
If you’re having trouble making ends meet, it may be time to bring in some extra income. There are many epic ways to do this, such as:
- Taking on additional clients or projects.
- Collaborating with other businesses in your industry (suppose you sell home decor, collaborate with furniture or rug sellers like RugKnots or Home Depot).
- Offering new products or services.
- Increasing your prices (this may be the last option).
- Finding creative ways to cut costs.
- Any extra income you can bring in will help you pay off your debt faster.
The Final Thoughts
No business owner wants to be in debt, but it’s a fact of life for many. A business needs continuous financing to grow, and sometimes that financing comes in debt. The important thing is to have a plan to pay it back. The tips above are just a few ideas to help you get started. The most important part is to be creative and stay disciplined. With a little hard work and dedication, you’ll be out of debt. What are some of the ways you’ve paid off business debt? Share your experiences and tips in the comments below!