Unless you’re extremely fortunate, it’s inevitable that you will have business debts in the first few months after starting up. Almost all business owners will take out loans to finance the company at first, as otherwise, they would not have sufficient capital to get the business off the ground. Having debts is not a problem as such; it’s how you manage them that matters.
So… How business debt problems can be solved?
If you notice debts beginning to stockpile and you’re concerned that they might become overwhelming, see if you can reduce interest rates or try to appeal to the goodwill of creditors with whom you have a solid relationship. If practical, you could perhaps lease out some office space to other businesses looking for a base. If the situation becomes very desperate, you may need to consider laying off staff, but this would have a negative impact on productivity and psychologically it is a very difficult thing to do.
Some debt problems can be solved with an increase in cash flow. This could involve having a conversation with your lender to ask for advice or being more proactive in placing yourself front and center in the marketplace. If you can afford to do so, offer discounts to loyal customers to drive sales, so long as there’s still enough cash coming in to alleviate the debt problems.
Even if debts are mounting, though, you will need to keep certain expenses paid, not least to staff and suppliers. You may be required to prioritize some items of expenditure, so decide what is most important to you and keep on top of those expenses.
For more advice on how to handle business debt effectively, check out this infographic from Eazy Cash.
Now is your turn!
What is your most important advice to effectively manage business debt?
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