Many small businesses run into financial issues from time to time, especially when they’re just starting out. If your business has racked up some serious debt lately, you may be feeling overwhelmed and possibly even worried about having to close up shop.
Before you give up hope, know that you likely have more options than you may think and, with some persistence, you can get your books back in the black. Here are five steps that can help you get started.
1. Reduce Your Expenses
Taking a very critical look at your ongoing business expenses can be crucial to getting your business out of debt, and that includes reviewing whether any employees you have are absolutely essential. Likewise with any service providers you use.
It’s a good idea to make a list of all your monthly business expenses to see where you can make cuts. If there are any nice-to-haves on the list, it’s time to let them go.
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2. Get Paid
In a recent survey done by Nav, 60% of business owners who considered closing their business in the past two years cited cash flow issues as the main factor influencing their decision. One of the quickest ways you can go about generating quick cash is by reviewing who owes you money. If you have any customers who have been slow about paying you, you may want to start chasing them for that cash.
You can start by making a list of all of your outstanding invoices and then contacting those customers and politely reminding them of their balance due. Chances are you’ll probably have some hold-outs, but you’ll probably also find some clients willing to make good on their debt right away.
3. Find Some Extra Revenue
Now’s also a good time to sit down and make a list of things you can do to bring in more money, both in the short and long term.
In the short term, could you hold a sale to help move some merchandise you’ve already paid for? Can you offer previous clients additional services or a discount for return business? Can you ask them for referrals for other possible clients?
In the long term, will a stronger social media presence help you grow your business? Could content marketing help you engage with more potential clients? Do you need to consider a more robust marketing and advertising plan?
4. Sell Some Assets
Most businesses have some assets that can help generate some extra working capital in a pinch. Do you have some old computers or other equipment you could get rid of? Can you sell your business vehicle and buy something less expensive? Essentially, anything you own or lease that can be sold without jeopardizing your ability to do your work or create your product should be considered.
5. Consolidate Your Debts
If you have several lines of credit, such as business credit cards, bank loans, or even investor funding and you’ve fallen behind on your payments, a debt consolidation loan could lower your payments and help you get your business back on track. This explainer on debt consolidation loans can help you get started.
If most of your debt is on credit cards, you could also consider applying for a balance transfer credit card that offers 0% financing on balances transferred from other cards. It won’t get rid of your debt, but it could help free up some cash flow while you work on the steps above, and it will likely save you money on interest payments as well. Balance transfer credit cards generally rely on personal credit in the approval process. You can see where you personal and credit business scores stand for free with Nav and be matched with the best offers for you based on your credit profile.
6. Ask for Help
Whether it’s friends and family you go to, or equity crowdsourcing, finding money to get you back in the black can sometimes be as simple as asking. Equity crowdsourcing, for example, lets you give a slice of your company in exchange for capital. This can be especially helpful if your credit has taken a hit.
7. Consider Your Credit
The financing options mentioned above all have different requirements when it comes to your credit scores. For example, equity crowdfunding may not have a minimum credit score requirement, whereas credit cards and banks offering debt consolidation loans will. That’s why it’s a good idea to understand your personal and business credit scores before you begin considering the solution that’s right for you. The stronger your scores, the more options you’ll have available to you.
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