Entrepreneurs often rely on debt to “keep the ball rolling”, but if you are not wary enough, you may end up being saddled with debt. A business loan, which you take out thinking it would help grow your business, can become a snag and make it difficult for you to ride out. Business debts accumulate sooner. They may restrict the cash flow, and soon, it will become unmanageable. You should be prudent while borrowing money. Well, if you are stuck in your debt, too, you should figure out a way to deal with it. The sooner you reduce your debt, the sooner your business will be back on track.

Ways to overcome business debt

It is no wonder that businesses rely on debt for their growth and success, but you should carefully plan for it so you do not struggle to pay it off. Bear in mind the demand for your products and services cannot be the same throughout the year.

Chances are you are making good profits now, but then the demand drops, and you start making losses. You should have a backup plan to pay off your business debts in case you fail to earn enough profits.

• Get your customers to pay sooner

Invoice billing makes you wait for a couple of weeks to receive payments from your customers. You will continue to pay your business expenses during that lag, which restricts cash flow. You should reduce the payment period to improve cash flow. For instance, if you offer 45 days to your customers to pay you back, you can reduce the payment length to 30 days. Ensure you receive customer payments before your business expenses are due.

• Track down late payment customers and charge interest rates
• Keep sending them reminders of when their payments are due.
• You can hire a collective agency if you do not want to chase them. You will have to pay service fees to the agency.
• You can offer discounts to make your customers pay before the due date.

Getting your invoices paid on time will maintain a good cash flow, and you will be able to meet all of your business expenses, including online loans from direct lenders.

• Increase revenues

You will have to increase business revenues if you want to get rid of debt. There is a possibility that you are not generating enough revenue.

• First, you need to identify if it is something you will need to work on.
• Then, find out where you are slipping up. You must know where things are going wrong to fix the issue.

You will have to engage your customers. Intensify advertising of your products to improve your brand visibility. Engage your customers by boosting your presence on social media platforms. You can even offer discounts to increase sales. In addition, upselling and cross-selling techniques should be used.

Chances are the prices of your products are low. You should think of revising your pricing to improve revenues. Before you raise prices, look at your margins. It will “clobber” your business if you raise prices despite good margins. At the time of charging high prices, make sure you provide your customers with value.  

If you already have a stockpile, clear it out. Sell those items at a discount. You can sell combo packs to remove the inventory. Discount offers attract customers who place orders more frequently. Carnivals are the best time to clear out the stock.

• Slash your business costs

Get a statement of accounts to look over your business expenses. Monitor the expenses of the previous six months to know the areas where you spend money every month. Check if you can cut them on. Here are the ways to keep your business expenses as low as possible:

• Hire multi-tasking people. It helps save money on the payroll.
• If possible, you should allow people to work from home at least once a week so you can save on utility expenses.
• Hiring remote people cut down on the rent and associated expenses.
• You can even cut back on refreshment food and drinks.

It will help you pay off your business debt faster. Since your debt is also an expense, you should find out a way to make it more affordable.

• Talk to your lenders to know if they can revise your payment schedules. They might do it if your business situation has changed.
• Negotiate for better interest rates. Lower interest rates will help you save a lot of money. You are likely to get lower interest rates if you take help before making a default.
• You can prioritise debts so they do not cost you a lot of interest.
• When you have multiple debts to juggle with, you can consider debt consolidation loans for bad credit in the UK with no guarantor.

You should avoid taking on additional debt. Some entrepreneurs borrow more money to pay off their debts. It will take you nowhere. Do not do it if you do not want your business assets to be used for the debt settlement.

• Take help from your friends and family

Your friends and family can help you get rid of your business debt. Talk to your parents if they have money to support you. If so, they might be willing to get out of the debt. Your friends can also lend you money if it is a small amount, on the condition that you pay them back.

Borrowing money from your family and friends means that you do not have to pay interest. They will understand your financial situation and help you. Some people can charge a small interest rate on the money you borrow, but it will not be as high as direct lenders charge.

The bottom line

It can be hard to surmount the debt when your business is going downhill, but despite that, a few tactics can help you stay afloat. You should figure out ways to increase your revenues and slash business expenses. The greater the cash inflow, the sooner you can pay off debt.

You should seek help from your lenders for better interest rates and repayment terms. Because you are already in debt, you should avoid borrowing money. Your friends and family can also help you settle your accounts.

A business debt may seem like a never-ending burden, but you can get rid of it by sticking to your repayment plan.