The latest figures show that roughly 70 percent of all small businesses have debt. Whether you recently launched your latest venture thanks to a business loan, or you placed unexpected purchases on a credit card, it is easy to get into debt. Some debt can even be strategic in that it can pay off in the long run; however, debt is also like a drug, and many business owners need to take a hard line against growing their debt to ensure overall success.
If your business is suffering from too much debt, check out these six strategies for reducing debt and getting your company one step closer to the kind of profits you’ve been dreaming about.
#1 Write Down All of Your Debts and Balances
The first — and perhaps least desirable — step that you need to take is to write down all of your debts. Any outstanding balances should be placed on this list, including the amount of each monthly payment and the total balances owed.
Why take the time to do this?
If you don’t have an accurate understanding of exactly where you are at this moment, making meaningful changes will be difficult (if not impossible). You’ll never know how much interest you are paying and how much you actually owe to every creditor. In this situation, knowledge truly is power. Just by gaining an accurate grasp on your debt, you have the potential to save hundreds, or even thousands, of dollars.
During this time, you may decide to search for ways to cut costs, especially if you work from home. Try to find a cheaper internet connection, or look for free alternatives to “software as a service” packages you use on a regular basis. If you work from home, you could benefit from finding a new place to rent or buying a cheaper home. Every little bit helps, so try to find ways to pare down your budget.
#2 Pay Off the Highest-Interest Loans/Credit Cards First.
Once you’ve laid out all of your debts, review the interest rates you are paying on each one. This will determine which loans or credit cards you should begin paying off first, second, and so on. By paying down balances in order of the highest to lowest interest, you’ll end up paying less on the same amount of debt.
#3 Consider Applying For a Grant
In addition to cutting costs and finding other creative ways to reduce your debt, don’t overlook the potential for getting a grant. While this requires a bit of a deep dive, there are plenty of grants available for small businesses no matter where you're based. To apply, make sure your business plan is up to date, be specific in the type of grant you’re looking for, and then prepare to write an exceptional application.
# 4. Reexamine Your Branding
Take a look at your branding to make sure it represents your business well. Is it engaging? Does it stand out against your competitors? Does it really connect with potential customers? If your logo needs a refresh, you can use this free logo maker to create a new one. This can be an effective — and cheap — way to lure in new business.
#5 Educate Yourself on How to Manage Your Finances For the Long Term.
A more creative option for getting a long-term handle on your finances is to become an accounting expert - or at least boost your knowledge in the area. You can hone your business skills and learn the ins and outs of finance by taking online courses such as those offered by Coursera or LinkedIn Learning. Depending on your needs and interests, you can also take classes in business accounting, marketing, or economics. While it is a bit of an investment, some professionals will find that this can help them take control of their own business’s finances and maybe even expand their current service offerings.
#6 Enlist the Help of an Accountant.
You can hire an experienced accountant to join your team. Whether as a full-time employee or as an independent contractor, a financial professional can add a layer of accountability to your business that can propel it to new heights. Not only that, but you can also use this individual’s expertise for tax advice, spending guidance, and every other financial question you have.
Being in debt is a temporary situation, and one every business faces at times; however, with a bit of knowledge and discipline, you can navigate your business out of debt and into an incredibly profitable future.
About the Author
Sheila Johnson once enjoyed a very successful career, but her health was another story. She left the corporate world to start her own business, on her own schedule and, in doing so, found a routine that balances work life with taking care of her mental, emotional, and physical health. She created Well Sheila as a place to not only share her story but inspire others to put their physical and mental health first with a regular wellness routine and daily self-care.
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