Monday, 13 April 2020

Most small businesses have some debt. In most cases, debt is not an indication the business is in trouble.

In fact, many companies leverage debt to fund growth. Having a loan or line of credit can help your business improve cash flow, expand marketing efforts, prepare for future sales, purchase equipment and even hire new employees.

For any business, the key is to use debt wisely and to avoid taking on too much of it. According to a 2016 survey by ExperianTM, the average small business owner in the United States reported having nearly $200,000 of debt. Whether this is too much debt depends on each company's situation and ability to service their debt.

If your company's debt is starting to concern you—or if you want to be more aggressive about getting out of debt—there are some creative strategies that can help.

See the big picture

Your first step is to do a debt inventory of exactly how much you owe, your interest rates and your monthly payment obligations. From there, you can craft a plan to tackle your company's debt.

Just as with personal debt, you'll want to focus on eliminating or reducing the debt with the highest interest rate first, as it's costing you the most each month. As you're devising your debt-reduction plan and estimated timeline, take care not to get so aggressive you disrupt your company's cash flow or ability to meet essential monthly obligations, such as payroll, taxes, utilities and paying suppliers.

Chip away where you can

Even if you're already working hard to minimize overhead, there are always ways you can trim. You may be able to make arrangements with other businesses to share the cost of services, equipment and even employees. Renegotiate with suppliers, buy in bulk with other businesses and look for less-expensive alternatives. Use open-source or free cloud-based business software if you can. And make sure you're taking advantage of any association discounts for which you may be eligible.

Think outside the box to boost sales

Having more cash coming in each month can give you some extra funds to help pay down debt. Boosting sales can be easier than you think, too.

Consider starting a loyalty or rewards program if you don't already have one. According to the 2016 Bond Loyalty Report, loyalty program members spend more with retailers and are more likely to pay more for products and services than non-members.

Getting busy on social media can also help you improve sales. Ask loyal customers to write positive online reviews of your products and services. Create a social media marketing plan or beef up your existing one in order to engage existing customers and prospects online. According to Forbes, social media is moving the sales needle for many brands, especially when they add a “Buy" button to their posts.

Act on low rates when the time is right

When rates are low—like they are now—it can make sense to refinance if you qualify. You could opt to refinance one or more loans at a lower rate or, if you have good credit, consolidate much of your debt into a new, lower-rate loan. As always, there are possibly fees associated with refinancing, but if you can lower your rate enough, it could be well worth it.

You may also be able to lower the rate on credit card debt by transferring your balances to a lower-rate card. If you can get one with an interest promotion, such as zero percent for six months, you may have an even better opportunity to pay down your balance.

Don't wait

If your company's debt is becoming a source of stress for you, it's important to be proactive. Waiting to address the issue will likely result in additional debt accumulation and even more stress. A small business banking expert can give you valuable advice about what strategies and options would be best for your company.


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