Being an entrepreneur usually means that ALL of your money is tied up in your new business. It’s very common for new business owners to accrue debt because they need to borrow money for both living expenses and business capital. If your goal is to be financially solvent as a brand new company, it’s important that you dig yourself out of debt as best you can.
But how can you do that?
Check out your budget
Can you really afford all of the things you think you can? Take a good hard look at your budget, and see if there are any extras you can cut. Maybe you won’t be drinking coffee every morning, or those staff meetings won’t be held at your favorite restaurant. Many people have no extras, but those, who do, should consider trimming the fat--at least until they are out of debt.
Increase collections efforts
New businesses often struggle with collections, and this can lead to serious financial strain. If you find that your clients are not paying on time, include a late payment fee in your contracts. Or, just be more faithful with your billing and invoicing, as well as following up on the payments due.
Do you really need a large office space? Could you make do with a smaller one? Perhaps the location of your office isn’t as important as you might have thought, particularly if your business is not dedicated to retail. You can even sell off old equipment and furniture, which could earn you a bit of extra cash. Get rid of old or expensive phone systems, and keep it as simple as possible as you dig your way out of your debt.
Talk to your creditors
If your company is struggling, it’s time to talk to your creditors about your hard times. They may be able to provide you with a "hardship plan", allowing you to pay off your debt with better terms of payment. They may even be willing to offer a reduced settlement, given that you will be able to pay them more quickly.
Negotiate your interest rates
You took out an initial loan with an initial interest rate, but how much has that initial loan multiplied thanks to that interest rate? As you are struggling to get out of debt, try to negotiate with your creditors for a lower interest rate. You may find that your initial loan will be much easier to pay off if they lower the rate, and you’ll get out of debt more quickly.
Instead of trying to remember to pay back a dozen different loans at once, consolidate your debt into a single monthly payment. That way, you’ll never forget, and you’ll be able to set aside your monthly payments FIRST. You may even be able to negotiate for a longer term to repay the loans.
Don’t let debt sink your company, instead use the tips above to help you dig your way out of debt--no matter how long it takes!