Starting a business can be a thrilling and exciting thing. After all, you are finally going to put your business skills to use in an endeavor you can fully call your own.
If it’s your first time to run a business, stumbling on debts can be extremely stressful. However, relief from business debts can be very achievable with a few smart tactics and advice.
Here are some tips you can do to get out of debt and we also recommend viewing this article afterwards https://www.facethered.com/how-to-get-out-of-debt/
Don’t Make More Debt
This seems a bit odd for an entry in this article, but this is true – and this is perhaps the most essential step. If you want to get out of debt, then you have to be smarter with your finances. It’s important to try your best not to create more debt as you try to pay your current debt. You will initially find this stepthe hardest, given you’re likely to spend money on special circumstances.
- Of course, this doesn’t mean you should cut off employees immediately or cut out services. Try to assess just how much money you’re making and if you can function as a business without accumulating more debt for a certain period. Try to formulate a strategy to pay off your debt based on this given period.
- The best way to do this is by viewing and reviewing all of your business’s financial statements for the past few months. Try to analyze your profits, losses, and all relevant expenses to see where you can cut off for a bit. This doesn’t have to be a huge setback, just a short adjustment while you pay off your debt.
Assess Debt by Interest Rates, In Decreasing Order
When you have your financial statements with you, try to assess your debt as well. It doesn’t matter whether we’re talking about bank loans or credit card debts. Just like in debts you accumulate as an individual, business loans that have high-interest rates can really inhibit your ability to pay off thedebt you’re comfortable with.
- List your debt depending on their interest rates. Enumerate them with those with the highest interest at the top, and the lowest at the bottom. A listallows you to get a bird’s eye view on all the debt that you currently have based on the interest rates. The one you should be paying attention is the one with the highest interest rate.
- This high-interest rate should be what is called your “target debt.” Since this debt contributes the highest amount of money you have to pay in the future, focus on this one first. The sooner you eliminate this, the more chances your business gets to save for other debts.
Negotiate for Lower Interest Rates
It’s also entirely possible for you to get some of your interest rates lowered. This depends on the kind of debt in question.
- If have a credit card debt, you can transfer your other balances in credit cards to a single card loan with lowered interest.
- Bank loans also offer options for discussing with your loan manager about the various opportunities for you to change the parameters of your debt. If your business is in good standing in the bank, you may perhaps have a chance to renegotiate.
Create and Stick To a Repayment Plan
An essential step in assessing your debt is to determine the repayment plan that is appropriate for your business. The first step in doing this is to list all of your monthly payments, just to make sure we all have these things covered.
- You should look at the balance with the highest interest and check if you are capable of paying more than the minimum payment every month. This is what you can call the “Stack Repayment.”
- If you’ve analyzed your finances, then you already have figured out how much extra money you have per month to accommodate debt payments. These payments should be added to the minimum payment towards the highest interest loan. Focus on this since it eliminates chances of higher interest rates for your overall loan.
- Once you finish your first loan, apply the same payment you’re making on the debt with the second-highest interest. Repeat this method by “adding” the compound amount from this debt onto the next.
This “Stack Method” gives you the opportunity to accumulate extra money to pay your other debts without making you feel as if you’re losing money. This method will take discipline, but it will relieve you from stress in no time.
Starting a business and making sure it thrives are two completely different things. However, business debt is not something we can normally avoid. The best thing, then, is to realize that business debt relief is quite manageable and we are more than capable of relieving this and the stress that comes along with it. If you follow the tips above with a good financial strategy, your debt will be out of your hair in no time.