Being in business debt can be scary, especially if you don’t know how to get out of it and don’t have the resources. It’s common for startups to run into financial troubles, and in many cases, it’s because of overspending on unnecessary business expenses. Although you need to spend money to make money, you also need to make sure that your business expenses are helping your business rather than hindering it.
Otherwise, you might find yourself digging yourself out of an even bigger debt hole. Digging yourself out of a business debt takes courage, commitment, and planning, but the following eight ways to put yourself out of business debt can help you get back on track.
Assess Your Debt
It’s hard to get out of debt if you don’t know where your money is going. Once you’ve done that, you need to figure out how much debt you have and how much interest it accrues every month. It will help you determine how many months it might take you to pay off your business debts in full. Do your finances and see how much you will need and how long it will take to accumulate that kind of amount.
Spend Less Than You Earn
You can’t get ahead financially if you’re spending more than you bring in. Keeping close tabs on your expenditures—and doing so without judgment—is an essential part of finding success in life. However, we often overestimate what we need and underestimate what we waste. Cut back on expenses by eliminating things that aren’t priorities, such as premium cable packages, overpriced coffee drinks, and other unnecessary indulgences. The money you save will add up quickly.
Reach Out to People Who Can Help Solve Financial Problems
You’re not alone. Chances are there’s someone in your life who has seen you come up against a challenging situation or who knows something about what you’re going through. Ask for help from that person, and let them know how much it would mean to you. If you’re buried in debt, reach out to a financial expert for advice on how you can pay down your liabilities.
A mentor can also be invaluable when taking on a project, especially one as big as digging yourself out of debt. You can also approach bankruptcy attorneys if you think insolvency might be an option; they have firsthand experience dealing with these issues, making them uniquely suited to offer sound advice.
Formulate a Better Budget
First and foremost, you’ll need to take a serious look at your budget. You’ll have more money coming in than going out, which means you can address issues head-on instead of scrambling for crumbs. Make sure you are saving enough for taxes and accounting fees, which will save you from having to cut back later on. Next, look at your cash flow—start with an ideal month (one with no one-time expenses) and work up from there, trimming costs where possible.
Consider Selling Assets that Are No Longer Relevant
When you’re in debt, it may seem impossible to pay your bills. But it’s essential to look for solutions and not just throw up your hands and declare bankruptcy. If you have anything that can be sold for cash, it might help. Whether it’s an antique car or a gold watch—anything that doesn’t contribute directly to your business but could still fetch some cash is worth considering as an option.
Create New Revenue Streams
The old saying the squeaky wheel gets the grease holds — ask any debt collection agency. If you fall behind on your payments, they’ll likely ramp up their efforts and annoyances to get you back on track. That said, do everything in your power to avoid falling into debt. Keep an eye on your cash flow by creating new revenue streams in your business. Perhaps enter the international market, or offer an additional product for sale that requires minimal overhead and labor costs.
Negotiate with Lenders
You don’t need advanced accounting skills or a background in finance to make negotiations. You can ask your loan to be paid and turned into a package for it to be paid long-term. It will give you time to pay for everything with more time in your hands, without having to sacrifice other assets and especially your business. You can also negotiate for them to lower interest rates if you’ve had a good record of paying on time consistently.
It’s time to be smart about your finances and put into place long-term strategies that will keep you in good shape as your business grows. Having just read seven tips, we hope you have enough information about paying yourself out of debt.