Operating a small-scale business? Are you planning to close it down because of current debts? Well, according to the latest studies it has been found that around 49% small-scale business owners find it extremely difficult to manage with their present debts. Due to the debt you owe in the market, it is not a wise decision to close down your business.
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Let’s find out how to reduce your market debts without closing the business.
There are certain models of business where debt is essential for the growth and expansion, but too much looming debt can actually cripple down your business.
Mark out the debt amount you have in the market
When you are trapped in debt, the very first thing that you need to do is to find out the tools that you have in your hand before you can actually start finding a way out. Ignoring the debt amount is not a wise decision because it will eventually lead you to nowhere.
Identify the total amount of debt you have from your bookkeeper and develop a monthly budget. This will help you determine the amount of cash you can actually manage for repaying off the present debt amount. Some of the common debt reduction strategies are given below:
- Setting a specific goal for your income in order to pay off your debt amount is essential. This even works better if it is tied to a specific source of the income stream.
- Again, the percentage method is also a better option where you can dedicate a certain percentage of your overall business profit for paying off your extra debt amount.
- Make an expenditure plan where you will include only the daily essentials. This way you can set up voluntary austerities till you completely pay off your debt amount in the market.
No matter whatever type of small business loan you have, using the strategies given above can help you in repaying the amount within a certain period of time. But the strategy can prove to be effective only if your finances are dialed in. If you are not able to stick to a particular budget or the cash flow of your business is variable, then it is highly possible that at the end of the month you may end up generating more amount of depth.
Negotiation
Get into negotiation with vendors
Is it possible to extend the terms for your payment on the outstanding invoices? On the other hand, is it possible to negotiate for a higher discount for early payment of new purchases?
Renegotiate the amount of loan in the market
When you cannot repay the loan amount to your lender, it implies a significant loss on their part. Sending loan collection agents is no doubt a huge loss for the money lenders. So, you can always expect that they will be flexible and help you in negotiating the loan terms. Talk with them about the late fees, renegotiating the interest rate as well as re-structure in the payment options. Further, a copy of hardship letter will help you in negotiating with your creditors.
Repaying the loan amount to your lender within the agreed time frame is always the best policy. But even if you fail to do so, you should pick up the calls and reply to the emails for negotiating the loan terms. Remember, negotiating the loan terms will simply help you in getting a better credit score.
Automate the payment for your debt amount
This is one of the best ways of repaying the debt in time. Link the debt repayment option with your salary account so that every month when you receive your salary, the amount will be automatically deducted first. This method of repayment will ensure that your debt amount is cleared off within a short period of time. Saving cash is quite difficult owing to a number of reasons. Having the debts paid off in the initial days of the month will ensure that you are free from the burden for the remaining month.
What is Debt consolidation?
Debt consolidation is one of the best policies to pay your current rates in the market. Here, you can take a huge loan to repay of the small loans. The rate of interest is quite low. This can even help you with your monthly finances because you will no longer have to pay so many lenders along with the high-interest rate. You will only have to pay a single repayment amount to the debt consolidation company. Thus, this will help you to reduce the debt amount to a certain extent. But remember, approaching a debt consolidation company means you will have to keep a certain amount of collateral ready to get the amount according to your need. This may even add up to uncomfortable risk.
Read the other blogs to know more about debt consolidation companies and how they work to help their clients.
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