According to Forbes, Covid -19 pandemic is responsible for business losses and debts in 79% of small businesses in the US. Business debt can be advantageous or disadvantageous depending on the economic conditions underlying them. Business debt’s bright side entails expansion and success in business. However, if you fail to meet your initial business plans, your business financial debt may be challenging to settle.
Here are strategies to handle your business’s financial debt.
Increase Your Business Sales Revenue
You need finances to settle your business debt. Therefore, you should enhance your revenues. You can apply various strategies to attract customers to boost sales. For instance, you can create special sales and promotions to lure clients into purchasing from your business. However, these promotions should not be costly as this will negatively affect your sales revenue.
Additionally, you can increase your sales revenue by adding value to your goods and services. Value addition, coupled with an increase in prices, can enhance your revenue if consumers find your products to be of quality. Thus, you will get a competitive advantage over your rivals. Ultimately, you will get finances to settle your business debt.
Encourage Your Customers to Settle Payments Sooner
Not all customers pay promptly. You should change these tendencies by reducing the payment period. For instance, if your payment terms require the customers to pay within 60 days, you should reduce the period to 30 days for upcoming purchases.
You can also track down clients with outstanding balances whose payment period has expired. In this case, you will remind them of their obligations and request them to pay soon. However, if your pleas fail, you should hire a professional debt collection agency. You will spend some amount to pay for the agency, but you will secure your receivables in the end.
Reduce Your Business Costs
If you are struggling with the current debt, you should cut the possibilities of increasing it. A large debt indicates that you spend more. You should cut down your expenses to avoid falling into a worse financial situation. Create a priority list of your business expenses and spend on the top expenses.
Furthermore, you can embark on saving rather than spending. Keep your business budget minimal by reducing the quantity in cases where the expenditure is more than what your business requires. Ultimately, a reduction of business costs can help you manage your business financial debt.
Organize and Prioritize Your Business Debts
Things may get tough if you have more than one debt. You should check out your debts and weigh them to establish the ones to settle first. When prioritizing, some of the factors to consider are the interest rate, the business collateral you risk losing, and your business relationships with the lenders.
You should prioritize paying business debts that risk damaging your business relationships with your best vendors. Also, depending on debt collaterals’ importance, you should prioritize settling debts with the most valuable collaterals. Equally, you should consider settling loans with high-interest rates before the lower ones. In the end, through debt prioritization, you will successfully manage your business financial debt.
Negotiate for Better Conditions
You should consider approaching your creditor and request for easing of the debt restrictions. During the negotiation, you can request an extension of the payment period, reduce interest rates, or reduce minimum payments.
If these negotiations fail to work, you can consider consolidating your business debts. In this case, you will take one loan that will settle all the others. Ensure that the resulting loan has favorable terms than the small ones. Based on the current conditions, you can weigh out debt consolidation vs debt settlement approaches to handle your business financial debt.
Seek Assistance from Your Family and Close Friends
When you run out of options, family and friends can be helpful. You can get loans from either of them and pay later as agreed. These parties are more understanding than the other traditional lenders, and they require little or no interest. Thus, you can use them as a solution to handle your business financial debts.
Business financial debts can be challenging to handle in difficult economic situations. You need appropriate strategies to handle these debts and for your business to emerge stronger than before. For instance, you can consider increasing your business sales revenue, encourage your customers to settle payments sooner, and reduce your business costs. Also, you can organize and prioritize your business debts, negotiate for better conditions, and seek assistance from your family and close friends. Ultimately, using these strategies, you will efficiently handle your business financial debt.