The concept of debt is so ingrained in our culture that most people accept it as a necessary part of life. Many individuals accumulate personal debt, including credit cards, student loans, car payments, and mortgages. Another type of debt that may affect small business owners at one point or another is business debt.
Businesses in debt aren’t necessarily irresponsible or on the road to bankruptcy. Small business debt can exist for perfectly valid reasons. A small business owner starting their company might need loans to purchase inventory or other necessary goods. Others may accumulate business debt to pay a mortgage on a retail space.
A company in debt means that it borrowed money for business purposes. However, it's essential to understand how reducing debt strategies are a wise decision that can put you on the path to better financial health. Debt in business can be tricky to resolve, depending on the lenders you’ve borrowed from and the total amount you owe. In this blog, you’ll learn how to get out of business debt in five steps.
You can eventually rest easy knowing that you’re no longer in the category of businesses in debt.
Step one: Assess your current financials
This first step in getting out of business debt should be relatively easy as long as you understand and follow some simple record-keeping habits. If you keep good records, your small business debt will be much more manageable to overcome. Plus, you'll be facing a much bigger workload during tax season.
You don't need to be a financial expert, but you should know the money flowing in and out of your business. A basic understanding of your financials will include the following practices:
Step two: Create a debt repayment strategy
This next step involves tackling the debt, but be aware that this might take some patience. Create a strategy that's both easy to follow and realistic. You may be tempted to set high goals for repaying your business debt as quickly as possible, but you may feel discouraged if you attempt to take on everything at once. Here are some tips to use in your strategy:
Learn more about how to consolidate business debt
Step three: Reduce business expenses
When you're a small business owner, you have control over your business expenses and can therefore cut costs when needed. If you're ready to reduce debt strategies, it’s time to decide where you can cut back and save some money. Consider the following tips:
Step four: Boost your revenue
Small business owners are likely interested in making a profit and boosting their revenue. Businesses in debt may have a little more urgency in increasing their revenue, so here are a few ideas that can help improve your revenue:
Step five: Consult a professional
Lastly, one of the most effective ways to get help with business debt is to work with a professional who can advise you on the best strategies. A financial specialist like a CPA can show you how to maximize savings in your business operations. It helps to have professional guidance on activities like bookkeeping and payroll because many small business owners may need to be made aware of unnecessary spending.
A business debt specialist at 1-800Accountant can also help guide you through government assistance programs that may help businesses in debt. Programs will vary based on your location and type of business, so it’s best to work with a professional that understands these requirements. Contact us today and learn more about our business debt services.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.