7 Tips for Digging Your Small Business Out of the Debt Trap

Financial woes are a normal part of any business organization. Even big brand companies have their own share of financial turmoil. For smaller businesses however, the impact can be much closer to home since many of these are family-run. If you do find yourself heavily indebted to your creditors, here are 7 tips for you to slowly dig out of the hole your business is currently in.

1. Sell non-performing or non-vital assets

Make an inventory of everything you have. Now try to determine which of these items you must absolutely have for the successful operation of your business. If it is not that all important, then you might want to consider letting it go. For instance, if you have a 10-man office and each one has a computer of his own, maybe selling 5 units and devising a shared-resources program can help.

2. Cut unnecessary spending

One of the major drawbacks of small businesses is that their discipline when it comes to money management pales in comparison to big companies that may have CFOs and other finance and budget experts calling the shots. Again, it’s time to review where you are spending most of your finances in. Are these absolutely necessary? Do you have to use the company vehicle to deliver a bouquet of flowers just a few blocks away?

3. Review your budget

In line with the first two, you really need to go back to your budget plan and try reconsidering a variety of parameters that you may have overlooked before.  It is also possible that your projections were way too optimistic. Now that you have financial woes, you might want to put these into consideration for a more reasonable budget plan.

4. Prioritize debt payments

If you have several creditors, it often helps if you can identify which of your debts should be paid first. Paying for your debts all at the same time can substantially drain your fiscal resources, further digging for yourself a much deeper hole.

5. Speak with your creditors

To prioritize your debt payments you have to speak and negotiate with your creditors. They are humans as well. Be transparent enough in disclosing your financial difficulties, but never make the impression that you are seeking amnesty. As a businessman it is still your inherent responsibility to make good in your promise to pay your debts.

6. Consolidate your loans

Putting your different loans under one account can help you immensely since you will no longer have to deal with a variety of creditors. One of the best approaches to debt management is to consolidate a number of short-term loans into a single long-term package. At least, you’ll only be paying to one creditor.

Reduce the payment terms with your clients

If your business happens to provide long-term payment plans for your clients, maybe you should start considering a much shorter-term payment plan. Instead of a 90-day term you can opt for a 30-day payment plan.

It’s not easy digging your small business out of debt. But, it can be done. Just heed these tips and you’ll crawl right back up to the top.