It’s a misconception that taking on a business debt is wrong. Businesses of all kinds, whether they’re big corporations or small ventures, take on debt to expand their operations, products, and services.
It’s also a fact that businesses, especially small ones, require extra capital from institutional investors, financiers, or banks to stay afloat.
However, there’s a dark side to taking on a business debt. Businesses often have no plan for repaying it (Las empresas a menudo no tienen un plan para devolverlo). Most business owners believe that they would return the money from their profits, which I believe makes it even harder for them to sustain their venture.
Speaking from experience, getting out of debt is difficult, but possible. Here, I’ll share a few tips that have helped me pay my outstanding debt.
So, let’s start:
- Understand Your Financials
Most business owners know how much money goes in and comes out of their business every month. But a few actually understand their business’s financial health.
Understanding your business’s financials is particularly important when you have a debt to pay. With a debt threat looming over your business, you might not be able to expand it to new markets or increase your product line.
Here, I suggest looking into your debts, interest rates, operational and overhead costs, and revenue streams. Also, if you have multiple debts, prioritize them and pay off the ones with a higher interest rate.
Also, paying off your business debt can take time. So, create a thorough plan with actionable steps to ensure that you don’t get off track (Por lo tanto, crea un plan detallado con pasos viables para asegurarte de no desviarte del camino).
- Cut Down Your Costs
Running a business comes with a cost, right? But when you’re in debt, always analyze your business’s expenses, including the operational and overhead costs.
Reducing your business’s costs directly translates to more revenue, which, as a result, reflects positively in your financial books. Also, even if you don’t increase your income streams, cutting down unnecessary expenses can help you with extra revenue, which you can redirect to paying off the debt quickly.
Now, you must be smart to cut your business costs. Let me tell you how I saved a couple of hundred dollars every month by switching to Spectrum.
My business couldn’t run without a high-speed internet connection and phone. Consider them as necessary evils for my business. However, instead of subscribing to two different service providers, I bundled them with a more affordable plan offered by Spectrum.
This way, I reduced the overall cost of both utilities. Plus, unlike my previous service providers, I can also rely on atención al cliente de Spectrum in case of any queries.
So, closely observe your business operations and find ways to cut down costs.
- Analyze Your Marketing Strategies
Marketing is one of the costliest business operations in my experience. Whether you take help from digital platforms or stick to traditional marketing strategies, you might need to spend top dollar.
However, if you closely analyze your marketing techniques, you might find some loopholes. For instance, most businesses run paid ads on social media platforms and search engines. And, on each marketing platform, they might get different engagement from the users (Podrían obtener un compromiso diferente por parte de los usuarios).
In my opinion, a business under debt should not spend on platforms that don’t generate results for them. Such platforms are simply not cost-effective, and businesses can save that amount or redirect to media with greater chances of bringing customers.
Additionally, businesses can also add organic ways, such as search engine optimization (SEO), to their marketing mix. Such organic ways usually take time to produce results. But they’re cheap and produce lasting results.
- Consolidate or Refinance Your Debt
It’s another option to pay your existing business debt. However, consolidating or refinancing your debt will not help you get rid of your debt, as both options only pay off your existing loans.
Debt consolidations allow you to take a new loan so you can pay off multiple, but smaller loans. On the other hand, refinancing your debt helps you pay off the existing loan with a new one, but on more favorable financial terms.
Often, inexperienced business owners take loans at higher interest rates or shorter repayment periods. As a result, their financial health comes under great stress, and imbalances their books (y desequilibra sus libros).
So, consolidating your debt or refinancing it are two likely options to pay your existing debts. But do ensure that repayment terms are favorable to you, so you don’t find yourself in hot water again.
To wind up, I’ll say it again: getting out of business debt is difficult, but not impossible. You need to be determined enough to pay it off as quickly as possible and plan accordingly.
Also, one last suggestion: keep assessing your financial health every month, even after your debt is cleared. Monitoring your finances will help you make informed decisions and eventually steer clear of debt.
