Financing a business is hard.
Unless you’re one of the lucky people to inherit a small fortune or get financing for starting a business from a friend or relative, you’d probably be looking at getting a business loan to fund your start up costs.
Business debt can come in various forms;
- business loan,
- credit card
- or line of credit.
Either way, debt must be managed effectively and cannot be neglected as part of your business management. Most business owners are often weighed down by the daily operations of their business, and often neglect such financial matters.
To help you get on top of things, we’re starting you out with a few pointers on how to effectively manage your business debt.
Keep a Close Eye on Your Debt
No matter if you’re talking about a business debt line or the standard credit card, knowing exactly how much you owe and how you’re going to pay everything back is the first step in getting rid of any kind of debt. As long as you have a clear image on your debts and how much you pay for everything on a monthly basis, you will be able to properly decide which one to tackle first.
So how do you keep an eye on your debt? It all starts with tracking. Forget complex software or accounts. Just a simple spreadsheet will help you plan your finances and repayments appropriately.
It’s recommended that you start with the highest interest rate debt first so that more of the money you’re making every month remains in the company. Do that and you’ll see your money doubles like playing casino free spins! Ka-ching!
During this time, you need to tighten your purse strings. All fun must go out the window. If you’re hooked on expensive entertainment and meals, then now’s the time to really buckle down and kick the habit!
Boost Sales Numbers
Of course, it’s a lot easier to repay debt when you’re making when money’s rolling in.
If you’re cut throat enough, you could go all out in selling what you can to drive sales numbers.
There are a few tricks that are known to help boosting sales such as rewarding loyal customers, being extremely active on social media as a free form of marketing and advertising ( well, almost free thanks to Zuckerberg) and even raising prices if your product is really wanted on the market.
This last point is especially effective. Many business owners experience high sales volumes. They see their shelves empty from all that demand. Yet they don’t stop to think – hey, should I be raising my prices? A mere 5% increase could be enough to fund your monthly repayments!
Another trick you could try is to extend credit to your customers. It’s not ideal because you’re not collecting the cash upfront. However, allowing your customers to get their goods and pay you later could entice them to buy from you vs someone else.
Worst come to worst – if your customers are dragging their feet in paying you, you could always factor your receivables.
Any of these three methods will show an increase in your sale numbers and if you apply all three properly, you can consider it the best business debt advice you can get.
Try Cutting Costs
If you want to hear about a reliable business debt solution, then this is it! Cutting the costs goes hand in hand with the previous advice of boosting sales, if you manage to bring more money in and spend less, you will have a lot more to take care of your debt. In order to cut costs efficiently without affecting production and sales, you can use the services of experts in the area that will come with solutions and alternatives to how the things are being done in your company right now.
All in all, it is more a matter of common sense than advanced economics if you want to keep your debt under control. If, for some reason you can’t apply the above suggested steps, there’s always the alternative of trying to find a more advantageous financing for your business.