Your small business needs financing to reach its full potential. Many entrepreneurs diversify the sources where they get resources for their growing companies. They get loans from banks, personal credit cards, third-party investors, credit companies and others. However, sometimes they miscalculate and put themselves in a position where it would be difficult to make payments. They missed their sales targets, they bought too many slow-moving or unmovable products, they hired too many employees, they failed to understand the market and others may have constrained their ability to pay creditors on time. This dilemma may set you back; however, it’s not a problem you can’t recover from. Many businesses have overcome this challenge and came out stronger.

Experts on online bookkeeping services cite the following tips that enable you to get out of business debt.

Find Ways to Reduce Spending

Business debt puts your company in a financial constraint. Your options are limited, and you’ll have less resources to expand, develop new products or improve customer service. To get out of debt, identify ways you can reduce spending in various aspects of your operations. Consider categorizing your expenses into the following:

• Eliminate: These are expenses your small business can do without. Some that fall on this list are non-performing employees, office equipment you no longer need, subscriptions or memberships that you seldom or don’t use at all and others.
• Negotiate: These are essential expenses you need but can’t let go of. Determine ways to reduce costs through negotiating new payment terms, inclusions, and fees. Discuss these with your supplier and business partner. If they don’t agree with your new terms, consider looking for a new business partner.
• Continue: These are expenses that you can’t do without to keep your small business operational.

Once you categorize your expenses, it will be easier to determine which ones you can reduce or cut-off to pay debts. Reducing costs allows you to improve the cash flow of your small business.

Look into Your Budget

Experts on online bookkeeping services mention that you need to review your budget to get out of business debt. Doing so enables you to identify which expenses you can reduce, eliminate, or continue. It also allows you to determine your company’s financial situation and whether you can weather the current debt crisis or close your company. If your budget is no longer feasible, it’s better to create a new one that fits your needs to pay debt. Re-allocate and maximize your resources so that you can cut costs. Implement your budget and stay within it so that you can strike a balance between paying off debt and maintaining the profitability of your business.

Make Debt Payment a Priority

Going about your usual operations and ignoring debt will not make it go away. You must address it head on and make it a priority. Create a budget and set aside an amount that goes directly to paying debts. Start with the high-interest ones first then work your way down. Put debts with guarantees on your personal assets if you default ahead of other types of debt as well. You have to sacrifice some projects and expansion plans, but the faster you pay the better your financial situation will be. Prioritizing debt may temporarily stunt your growth, but it can open other opportunities in the future.

Consider Debt Consolidation

Consider debt consolidation to make it easier for you to pay creditors. Debt consolidation has its pros and cons but it is a viable option for small business owners. This practice gathers all your debts and turns them into one loan you can pay based on your agreement with your creditor. A high credit score may also allow you to get lower interest rates when you consolidate your debts. This enables you to pay the amount faster and get you back to financial flexibility.

Negotiate New Terms

Manage the money of your small business and pay debts on time by negotiating payment terms. Companies that offer online bookkeeping services cite that you should approach your creditors and find a compromise so that you can keep your small business while paying your debts. Agreements could lead to different outcomes such as longer payment periods between 30 to 90 days or longer, higher interest rates, a reduced settlement amount for outright payment, personal asset guarantees for non-compliance, and others. Discuss agreed upon terms and put them into writing. Uphold your end of the bargain so that creditors will trust you. Doing so may even improve credit terms after you settle your current debts.

Boost Business Revenue

Paying your business’ debts is important, but if your source of income is insufficient your company will likely close because of all the losses it’s incurring. Find ways to boost revenue despite your company’s debt. Identify high-demand products or services and direct resources to market them to your customers. Determine new ways to use current products in your portfolio, produce complementary items to pique customers’ interest, or increase the number of items your customer base purchases. An uptick in their purchasing behavior is favorable to your business. The extra profit you generate will not only improve your sales figures, but also allow you to pay debts faster. Brainstorm with your marketing team to determine other strategies you can implement that boost revenue.

Sell Unnecessary Assets

You’ll need all the funds you can get to pay debt on time while trying to maintain operations. Move assets that are no longer in use or still have value, but you could do without. Make a list of these items or properties. Determine which ones you could sell for an acceptable price and separate the ones you still need for your small business. Use the money you generate from selling some assets to pay debts. Another option is to lease them out instead of selling them. Office spaces and some equipment have long-term value if you decide to let others use them.

These are some of the ways you can pay your debts and get your small business back on track to growth and profitability. Your situation may seem dire, but you can still overcome the financial challenges you may encounter as an entrepreneur. If you need assistance with updating your books, we at Robookkeeper can help. We offer online bookkeeping services at competitive rates. We provide outsourced bookkeeping services by teaming up with virtual bookkeepers. Our team keeps your books error-free and updated so that you always know your financial standing.