It’s no secret that many small businesses are struggling these days.
With the economy trying to rebound and the business environment shifting, it can be hard for businesses to keep their head above water.
If you find yourself in this situation, don’t panic. There are ways to reduce business debt and avoid a costly bankruptcy. By saving money, negotiating with creditors, and making some tough decisions, you can get your business back on track.
In this article, we will discuss seven of the best ways to reduce your debt and avoid bankruptcy.
What are the best ways to reduce small business debt?
These are the seven best ways to reduce small business debt:
1. Save money where you can
One of the easiest ways to reduce debt is to save money where you can. Look for ways to reduce expenses and cut costs. This may mean negotiating with suppliers, downsizing your office space, or eliminating unnecessary expenses. Whatever you can do to reduce costs, do it.
Unfortunately, there are also times when you have to make tough decisions, like laying off employees. While this may not be the most popular option, it could be what’s best for your business in the long run.
2. Sell assets
If you have assets that are not essential to your business, consider selling them. This could include office furniture, equipment, or even your company car. By selling assets, you can free up cash to pay down debt. This is a good option if you don’t have the cash flow to make significant cuts to your expenses.
It’s best practice to use the money from the sale of assets to pay down debt, rather than using it for other purposes. This is a fast way to reduce the amount you owe and get your business back on track. However, it’s important to be mindful of what assets you sell. Only sell non-essential assets, as you don’t want to reduce your ability to function as a business.
This solution is best for quick relief from debts that can easily be cut with proceeds from selling assets. If you have few assets or too large of a debt load, another solution may be a better fit.
3. Negotiate with creditors
If you’re struggling to make payments, reach out to your creditors and try to negotiate a new payment plan. Many creditors are willing to work with you if they believe you’re sincere about getting your debt under control.
However, be sure to get any agreement in writing before you make a payment. This will protect you if the creditor tries to change the terms of the agreement later on. It’s important to remember that you’re not alone in this process. Many small businesses are struggling, so creditors are used to working with businesses in debt.
If you’re not sure how to negotiate with creditors, there are plenty of resources available online. You can also seek out the help of a professional debt negotiator.
This solution is a good option if you’re struggling to make payments but have the ability to pay down your debt over time. If you can’t afford to make payments, you may need to consider another solution.
4. Consider a debt consolidation loan
If you have multiple debts, you may be able to reduce your interest payments by consolidating your debts into one loan. This can be a good option if you’re struggling to make multiple payments each month.
Be sure to shop around and compare interest rates before you decide on a debt consolidation loan. You don’t want to end up paying more in interest than you are currently.
A debt consolidation loan can also help you reduce your monthly payments by extending the term of the loan. This will give you more time to pay off your debt, but it will also cost you more in interest over the long run.
5. Use a credit counseling service
If you’re struggling to get your debt under control, you may want to consider using a credit counseling service. These services can help you develop a budget, negotiate with creditors, and get your debt under control.
Thoroughly research any credit counseling service you’re considering. There are many scams out there, and you don’t want to end up in worse financial shape than you are currently.
It’s best practice to choose a nonprofit credit counseling service that is accredited by the National Foundation for Credit Counseling. You can also check with your local Better Business Bureau to see if there have been any complaints filed against the service.
A good credit counseling service can help you get your debt under control and keep your business afloat.
6. Make more money
This may seem like an obvious one but, if you’re struggling to make ends meet, your business needs to bring in more money. If you’re not sure how to do this, consider hiring a marketing consultant to help you develop new strategies for bringing in customers.
You may also want to consider increasing your prices. This may not be popular with your customers, but it could be what’s best for your business.
By increasing your prices, you can bring in more revenue and reduce your debt. Of course, you don’t want to price yourself out of the market. Be sure to research your competition and find a price that is fair and reasonable.
You may also want to consider offering new products or services. This can be a great way to bring in new customers and reduce your debt.
By offering new products or services, you can increase your revenue and reduce your debt.
7. Prioritize the most urgent debts
Make a list of all the debts you owe and prioritize them from most to least urgent.
The most urgent debts are usually the ones with the highest interest rates or the ones that are about to go into collections.
By prioritizing your debts, you can make sure that the most important debts are paid first. This can help you reduce your interest payments and avoid late fees.
Bottom Line
The consequences of bankruptcy can be damaging. If you’re struggling with small business debt, there are a few things you can do to reduce it. You can try to negotiate with creditors, consolidate your debts, or use a credit counseling service. You can also focus on increasing your prices or offering new products and services.
Ultimately, you should focus on reducing the most urgent debts first. When you focus on reducing your pressing debts, you’ll provide yourself with the breathing room you need to begin to reduce your overall debt.