Struggling with small business debt? Alleviate Financial Solutions offers expert debt relief strategies to help your business recover. Contact us for a free consultation to get back on track.
One of the scariest things to do is start your own small business. The risks are enormous, but the rewards can be exponentially greater. Perhaps the risk that causes the most sleepless nights is debt. A degree of debt is healthy, especially if it’s used productively and constructively to develop and grow your business. There’s also unhealthy debt, and that is what many small business owners struggle with. Often, the only financial assistance available is in the form of debt relief services.
The good news is that your business can recover from debt! You have to stick to the strategy of your debt resolution specialist.
How To Discharge Small Business Debt
To get some economic relief, you start with the same first step that everyone else trying to escape debt takes: If that doesn’t provide a financial breather, then you try all the other options until you find something that works.
Assess Your Budget
Small businesses can’t function effectively if they don’t have a structured budget behind them. Not all budgets are equal, however. If your mind doesn’t run that way, you should work with a specialist to create a proper business budget adapted to your business’s mission. If you haven’t consulted a business growth specialist yet, now is the time to find someone who will review several month’s worth of bank and credit card statements, and other financial records to create the kind of budget your business needs.
You’ll see income streams, regular weekly and monthly business expenses, and spending patterns that demonstrate your business’s financial health. A financial consultant or debt relief program strategist will help you analyze the data and come up with a business plan that will enable you to use business resources to settle debt wisely, without having too great an impact on your business’s operations.
The upshot of budget analysis is that you’ll see all your expenses and decide how to manage them. You can place them into three categories: continuous, negotiable, and elimination.
Continuous or essential expenses are those that you can’t do much about, like taxes.
Then there are potentially negotiable or flexible expenses. For instance, shopping around and comparing prices before purchasing supplies. Some suppliers might also be open to negotiating payment terms, giving you additional time to pay your account.
Some expenses can be eliminated. For instance, you can stop buying every cleaning product on the market and opt for multipurpose cleaners. Sometimes it’s not that easy, however, and you need to let an employee go; for example, letting go of your bookkeeper in favor of outsourcing financial services.
If it were that easy, you wouldn’t be in debt.
An expert eye might be able to identify opportunities that you’ve missed, so you can branch out into different products or services or tap into a new demographic. You might also negotiate payment terms with customers and clients to generate ready money.
Take Stock Of Debt
Get a handle on your debt; where it comes from, how big it is, the interest rates, and the monthly payment terms. Then prioritize debt. You can use the avalanche method, which means you tackle the biggest debt first. You maintain minimum payments on all other debt and put as much as you can into fulfilling your priorities.
With that taken care of, you have more money to settle the second-highest debt, and so on.
You can use the snowball method, which means you put all your effort into discharging debts from lowest to highest. The more debts you discharge, the more income is available to discharge debts.
Debt consolidation is one aspect of debt settlement programs. You consolidate all your debt into one loan, typically a low- or no-interest loan account. Instead of managing several payments with varying interest rates, you make one payment from the new debt consolidation loan account with drastically reduced interest.
Other Actions Taken
No actions or strategies are set in stone. You do what works for you. Consider a 2023 survey in which it was found that small business owners experiencing severe financial strain tried a variety of other tactics. For example:
- Over half raised prices (56%).
- Just over half (53%) used personal funds.
- Just over half used cash reserves (53%).
- Just under half got new business loans or extended lines of credit (42%).
- Just over 30% reduced hours, cut staff, and downsized.
- Just over 20% had to pay accounts late or not at all.
- Just under 20% of eligible businesses got relief funds (donations, business grants, or other funding) with no repayment necessary.
When All Else Fails
Sometimes, despite all your best efforts, you just can’t get out of the debt trap. In that case, filing for bankruptcy might be the only option left for you. It’s not necessarily a bad thing because it can give you a clean slate and a fresh start, should you want it.
Chapter 11 and Chapter 13 bankruptcy apply to your business situation. Chapter 11 is for corporations and partnerships, while Chapter 13 is for sole proprietors.
Talk to a business bankruptcy attorney before you make your final decision. Filing for bankruptcy is oddly expensive, and it can have a serious negative impact on your credit score and ability to open another business in the future. Bankruptcy attorneys can provide guidance for businesses, as well as some advice or insights that you can use to achieve financial freedom.
Trust The Professionals; Trust Their Experience.
You naturally feel protective over your business, and you want to give it the best chance of success. Sometimes success comes the long way around, and you have to overcome some trials and tribulations before it all comes together. As one of the best debt settlement companies in California, Alleviate Financial Solutions can guide you through financial trouble and get you out the other side.
For experienced and expert debt help, contact us at (800) 308-2935. You may also complete the form, and we’ll get in touch to arrange a free consultation.