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5 Ways to Deal with Business Debts

Scott Bilker Scott Bilker is the founder of DebtSmart.com and author of the best-selling books, Talk Your Way Out of Credit Card DebtCredit Card and Debt Management, and How to be more Credit Card and Debt Smart. Receive the 5-Year Loan Spreadsheet when you subscribe to his email newsletter.

It’s not unusual for businesses to have debts in the same way that individuals do. However, when debts become unmanageable, it can have a negative impact on your commercial operations. This is why it’s important to have an effective strategy in place to manage your commercial obligations. To find out how you can overcome financial obstacles, take a look at these five ways to deal with business debts:

1. Reduce Expenditure

This might sound like an obvious solution but cutting your costs allows you to reroute the funds and pay your debts off more quickly. Reducing business expenditure can be surprisingly easily, so don’t disregard this option straight away. If your commercial lease is due for renewal soon, look for cheaper alternatives or continue working from home, if this fits your business model. Alternatively, reduce the number of staff you employ and work with freelancers instead. Similarly, switching to different vendors or suppliers could be an effective way of cutting your business costs.

2. Take Out a Business Loan

Taking out a loan may sound like a counterproductive way of dealing with debt, but it can be a savvy business decision. When you can secure a low interest rate from a reliable lender, like AdvancePoint Capital, you can consolidate your debts and pay off higher interest debts with the loan. Then, you’re left with just one debt to deal with. As the interest rate on your new loan is lower than the debts you previously had, you’ll have less to pay overall.

3. Negotiate with Creditors

Instead of missing payments or spiraling into debt problems, you could try negotiating with your creditors. Extending the amount of time you have to make repayments, or reducing your current interest rate can be a viable way of managing your debts, for example. Lenders will be eager for you to repay the loan, rather than defaulting, so they’re often willing to negotiate with borrowers who are experiencing financial difficulties.

4. Adjust Payment Terms

If you’re running a B2B enterprise, you may give clients an extended period of time to pay for the goods or services they receive from you. A 30-day invoice period is fairly standard, for example. However, if this is causing cash flow problems within your own organization, you could shorten this to seven or 14 days. While you can’t retrospectively apply these changes to existing invoices, you can adjust future payment terms to ensure you’re paid more quickly.

5. Sell Outstanding Invoices

If you’re owed money, you could recoup some of your losses by selling these debts to companies who will pursue them. Although you’ll have to sell them for less than their face value, you will be able to ensure that at least part of the outstanding sum is paid to your company.

Managing Business Finances

Running a business is a challenge, particularly when your cash flow is disrupted or there’s a dip in revenue. However, getting professional advice or working with business strategists can help you to implement effective financial management processes and transform your commercial success.

This entry was posted in Debt Management, Earning Income. Bookmark the permalink. Read more articles by Scott Bilker. (Also see articles by all authors and articles in all categories.)

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