Being in debt can be challenging, but there’s no worse feeling than your business being in debt. You can’t run or hide from it, but you can take steps to get it under control. If you find yourself struggling with small business debt, we’ve compiled a few steps to help you get control of your business.
1. Assess and rework your budget.
Before tackling business debt, you need to have a solid understanding of your current financial situation. Assess how your business budget is operating. Is it covering all the bases or operating in excess?
A good business budget helps to identify income sources; fixed daily, monthly, and annual costs; and accounts for all variable expenses such as rent, or other unforeseen costs.
Seek professional advice from your accountant to figure your budget. Ultimately, assessing and reworking your budget should be the first step in forming an action plan for reaching your debt-elimination goals.
2. Reduce expenses.
Once you take stock of your budget, take a look at your operating costs. Do you have any excess expenditures you can do without? Decide which services and operations are absolutely necessary for the daily operation of your business, and cut the rest. Ask yourself the hard questions. Do you pay for subscriptions you rarely use? Are there professional memberships you can temporarily suspend? Could you potentially negotiate reduced prices and flat rates with certain vendors?
Use your financial statements to help pinpoint expenses contributing to your debt. Cutting costs is a sure-fire way to increase cash flow and reduce surmounting debt load.
3. Temporarily pay with cash (if you can).
Transition the way you pay for business expenses until you get your debt load under control. If you continue to use a business credit line or business credit card to make purchases, you’ll continue to worry about how you’re going to pay it off later. This method will force you to only buy what you can afford to pay for in cash. Paying with cash or cash equivalents such as checks helps to eliminate procuring new business debt and prevents you from letting existing debt increase.
4. Hire a debt management attorney.
If your efforts to climb out of business debt on your own aren’t working, you might want to enlist the help of a professional debt management attorney. An attorney can negotiate with creditors and collection agencies on your behalf to formally extend, renew, or change existing credit agreements. The process generally involves a written contract between you and the debt-restructuring company as well as the setup of automatic withdrawals from your bank account to settle outstanding debts.
These firms do charge a fee, but it’s usually a less-expensive alternative to filing for bankruptcy and will better rehabilitate your credit in the long run. If you decide to hire a professional, be honest with them on what you can afford to pay each month so that they can come up with a settlement that works for both you and your creditors.
Get in touch with McDonald Law Group today to get answers to your questions.
This information is provided for informational purposes only. It is not legal advice and does not constitute an attorney client relationship.