Debt can help female entrepreneurs to grow their business. However, if it goes out of hand, it can force them to file bankruptcy or sell their business. Smart money management, proper financial planning, and execution can help entrepreneurs get out of business debt. But what else can they do? Let’s find out.
How to get your small business out of debt
So what if your small business is in debt? As a woman, you are already handling so many things beautifully. This is yet another challenge. If you can manage your home, kids, and partners, you can tackle this as well. Have faith in your capabilities. You can do it. Here are a few tips to help you.
1. Create and analyze your budget
If you have not created a budget yet, it’s high time you formulate one. Your recent credit card and bank statements can give you enough data to create a budget as per the company’s financial situation.
Categorize your income and expenses. Are you making enough money from all the income sources? It’s time to find out that.
2. Cut down your expenses
Look at your expenses. Are you spending more than what is required? Are you making too many unnecessary expenses? Look at the company balance sheet. Calculate your income and expenses.
Negotiate with your suppliers to cut down your expenses on the raw materials. Get rid of unnecessary expenses altogether. Think about the employee benefits and the insurance policies. Maybe you can cut down one or two.
3. Analyze and consolidate your debt
Before doing anything, you need to have a fair idea about your debt. Collect data on the following things: How much you owe in total
Type of debt - business debt or credit card debt
How much you can pay every month
Your monthly payment amount
Payment term
Interest rate
Once you have collected the data, take out a new debt consolidation loan at a low-interest rate and pay off your existing debt. There are other ways to eliminate or reduce debt as well. For instance, if you have credit card debt, you can try to settle it. Negotiate with your creditors for a lower payoff amount. Show your financial statements to convince your creditors that your business is running at a loss. Once your creditors are convinced that you are in financial trouble, they may forgive a portion of your debt.
Make sure you tackle your urgent debts first. Urgent debts are the ones that carry high-interest rates. Do you have any business collateral? If so, you need to pay off fast. Or else creditors will confiscate your business collateral.
4. Ask your clients to pay fast
Are your clients paying on time? If not, it’s time to call and remind them about the outstanding invoices. Ask them to clear the bills as early as possible. How much time do you give our clients to pay bills? Is it too long? If the payment term is too long, try shortening it. For instance, if the payment term is 60 days, you can shorten it to 30 days. Your goal is absolutely clear. You need to collect as much money as possible to pay off your debts.
5. Increase your business revenue
Now, you need money more than ever. Explore new ways to boost your business revenue. Promote your products and services to lure customers. You can even offer special coupons to encourage customers to buy more products.
6. Adopt a new pricing strategy
Check the price of the products. Are you charging less than the market standard? If so, devise a new pricing strategy. Increase the price of your products after studying how much your competitors are charging. The revised pricing structure may help to boost your business revenue.
Conclusion
Negotiate with your creditors for lower interest rates and minimum monthly payments. If you have maintained a good relationship with creditors, they may cooperate with you. They may offer an extended repayment period to help you out. So, shed your inhibitions and explain how lower monthly payments can help to keep your business afloat. Your creditors may agree to do more than what you’re expecting from them.
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About the Author:
Attorney Loretta Kilday has over 36 years of litigation and transactional experience, specializing in business, collection, and family law. She frequently writes on various financial and legal matters. She is a graduate of DePaul University with a Juris Doctor degree and a spokesperson for Debt Consolidation Care (DebtCC) online debt relief forum. Please connect with her on LinkedIn for further information.