A guest post by Andy Masaki.
Taking out a loan can help you to expand your small business. But unfortunately, if your business doesn’t generate enough revenue to cover the monthly debt payments, you are likely to become debt-ridden. And it might put your business at risk.
For example, during the coronavirus pandemic, many businesses are witnessing a decline in their consumer activities. And eventually, their revenues are getting affected. In that case, you can get some small business lessons on how to survive the pandemic economy and do the needful.
But if you have business debts to pay off, you might be worried about it. Because carrying debts in your small business can affect your cash flow as you need to make monthly payments to your creditors. And thereby, you might have to shell out a substantial amount of your business revenue towards debt repayments.
But let me tell you, you aren’t alone. According to a study by Experian, the average small business owner had $195,000 in debt. That’s why you need to stop worrying. And look for some strategic ways to deal with your business debt with ease.
So, here we have listed some of the best possible ways that can help you to tackle small business debt at the earliest.
Reduce expenses as much as possible
You need to find out the categories where you can reduce the expenses. For that, you need to assess the current financial situation of your business. So, relook your business budget and try to reduce the costs as much as possible. You can follow some of the ways like:
- Sell off any unused equipment or office supplies that are no longer needed.
- Shift your office to a smaller space that has lower rent and utility costs. And if possible, ask your employees to work from home.
- If you have an unused office space, you can sublease it for generating some funds.
- If possible, cut down your outsourcing expenses. No doubt, outsourcing can help you to save time on some important tasks. But if you calculate your annual expenses, it might be a huge amount. So, find some ways to do those works in-house as much as possible.
This way, you can save a substantial amount of your expenses and use that money for paying off your small business debt.
Find ways to boost your revenue
You need to look for different ways to increase your revenue so that you can put more money into small business debt. And thereby, you can get rid of it at the earliest. Here are a few ways that you can follow:
Start a loyalty program
Rewarding your loyal customers can help you to increase your revenue. Because by rewarding them, they are likely to trust your business more. And eventually, it might encourage them to spend more.
Take the advantage of social media
Nowadays, most people go through online reviews before buying something. So, you can create a page of your small business on social media. And ask for reviews from your customers. Be responsive to any comments and engage with your customers as much as possible.
This way, people can know about your brand and can leave a positive review about it. And it can help to increase the revenue of your business.
You can offer volume discounts (a handsome discount for buying a large number of products) to attract more customers. It can lure your customers to buy more products from you.
Besides, you can organize a flash sale for your registered customers for a short period of time. It can help to impulse buy and sell your surplus if any.
Use your tax refund
Tax refunds for small businesses depend on the ownership and the type of business entity. So, if your business is entitled to a tax refund, you should make good use of it. You can put in that money to get rid of your small business debt.
To get a small business tax refund, you can work with a tax professional on a quarterly basis.
And if you want to calculate the estimated tax by yourself, the worksheet of Form 1040-ES of the IRS (Internal Revenue Service) can help you out.
Consolidate your small business debt
If you are exhausted by managing your multiple business debts, you can consider small business debt consolidation. By doing so, you can consolidate your multiple debts into single monthly payments by taking out a new loan. And probably with a much lower interest than your existing ones.
Thereby, you can manage your multiple business debts in a better way as you will have to concentrate on a single loan unlike before. And you can save money on interest payments too as the new loan is likely going to have a lower interest rate.
However, if you are worried about taking out a new loan, you can seek professional advisors to help with your small business and get your business back in good financial standing.
So hopefully, the above 4 tips will help you to deal with your small business debt strategically. And once you repay your business debts, you will have more money to reinvest, and most likely, you will be without any financial obligations.
Besides, if you are worried about debt in your personal financial life, you can seek debt relief assistance offered by a reputable debt relief company. They can help you by suggesting various debt relief options based on your debt amount and your current financial situation. And thereby, you would be able to deal with your debts in a much better way.
Andy is a blogger and financial writer associated with the Ovlg. He is a debt expert and a member of several online forums, where he shares his advice as well as tips to lead a financially independent life.