Own Your Business, Not Your Debt!
The credit crunch is everywhere, and every one deals with one form of debt or another. While the majority of people rely on their salaries to deal with debt, there are some of us who own businesses and have to generate our own income for sustenance. Running a business can be fundamentally precarious because of the element of risk involved in realizing any returns. During hard times, you have likely borrowed money to support cash flow in your business. Debt then surfaces when the situation gets out of control. Do these shortcomings really need to become such a burden? Consider the following suggestions to come up with a debt management solution that will work for your business:
Analyze cash flow.
Examine how much money goes out. Familiarize yourself with the details of what percentage is paid to the mortgage, insurance, etc., and what goes out to credit cards, auto loan payments, etc. Pay off loans with variable interest rates first, i.e. interest that fluctuates with the market. Keep tabs on all your business assets and be aware of how much is covered in debts. Cut all unnecessary costs.
Make a note of all tertiary expenses, however trivial they may seem, outside of the basic costs of production. Trim all costs you think are unnecessary to your business at the moment. If you are leasing property for your business, ensure that you are only leasing out as much as you need and not more. Postpone any expansion plans or other financial risks you may have been planning. Discount negotiation.
Maintain a good rapport with all your creditors to negotiate a bulk discount whenever possible. Limit purchases to strictly what is immediately needed. Taxes and Payments.
Adopt simple ways to reduce taxes. For example, you could defer a payment you were expecting in December to January, making it taxable in the following year. Make sure there are no taxes pending or any undisclosed income that may attract tax penalties. Focus on payments due to business.
Ensure you are stringent in collections from debtors. Give cash discounts and credits to customers who have a clear payment history. Loan consolidation.
This is an option most frequently used when debt gets out of control. It simply means borrowing a substantial sum of money to pay off all your smaller loans, then focusing on a single payment going out. It may be a wise decision to make provided you do the substantial groundwork in researching it. Look into details on interest, from whom to borrow and whether it will actually help in the reduction of your burden. Borrow only if you are convinced that debt consolidation will work for your business. Get Professional help.
Find an appropriate debt management counselor who can help you in the case of a crisis. Sit with him or her and draft out a debt management solution for your situation. Remember, “An oak is never felled with one stroke.� You have to work at reducing your debts. Make your business work for you, not your debt!