Cutbacks in business and consumer spending in recent times have made many small companies look extremely vulnerable, especially when there is a large dependency on loans, and exposure to creditors. Since, business owners are left with no choice but often to delay debt repayments as there is no cash leftover after meeting operational expenses, the situation can get really tricky with multiple creditors demanding payment.
So, what options do you have?
Increase Cash Flows
The first thing an entrepreneur faced with a liquidity problem should try is to increase the cash flow of the business. Examine the possibility of getting more orders from customers who are ready to pay in advance for a better discount, or think about acting as a subcontractor if you have excess capacity and not enough orders to fulfill.
If you have excess inventory piled up, try and liquidate them with a more attractive pricing. If you have spare space, especially warehouses, then consider letting them out to get some rentals into your kitty. If business is really slow, consider taking up a job on the side, maybe in the evenings to buttress your bottom line.
Tighten Your Belt
Cut down on expenses wherever you can; especially the overheads that might have a lot of fat accumulated over the years. Ask your accountant to prepare a detailed statement of income and expenses that will immediately throw up what can be trimmed to cut down the monthly expenses.
Be transparent about the state of things with your staff, suppliers, customers, as well as creditors. You will be amazed at how everybody will respond to chip in to ensure that the business survives.
Request creditors for a deferred payment plan and ask your customers to pay you in advance. Suppliers can also help by increasing the line of credit allowed.
Consider Alternate Sources of Funds
Though it seems crazy to take out further loans for a business that has already run into financial difficulties, you should definitely consult a professional financial consultant, especially one that specializes in small businesses. He will be able to advise you if a relatively small infusion of equity by you can be used to leverage further debt on favorable terms from banks or financial institutions specializing in small businesses. It may also be possible to get seed or venture capital funding that will exchange the debt for an equity stake if the business is believed to have sustainability.
Whatever be the sources of funds, you can be sure that you will need to show a business plan that is robust and fully discloses the current financial health and a realistic projection of future earnings.
Consolidate Debt
It is likely that you are really harassed with keeping track of your mounting debt and find it impossible to service multiple creditors with your limited business income. You should look to debt consolidation as a viable strategy for easing the financial pressure and keeping your business from turning turtle.
You need to approach a professional debt consolidation company that will extend a consolidation loan with which you can pay off your existing debt. You can find a reputed debt consolidation loan company by doing a Google search and also analyzing the numerous debt consolidation reviews available online. The state of your business, projections of the future and your ability to provide security or collaterals will influence the terms and the tenure of your debt consolidation loan. You should attempt to work out a solution that decreases your interest burden with the debt consolidation company by negotiating the accumulated interest and principal and applicable interest rate.
Use all your persuasive skills to convince the debt consolidation company to agree to a tenure that makes it easier for you to pay the single monthly payment that you need to pay now in lieu of the multiple payments earlier.
Takeaway
There are many other ways you can take to help your business surviving its debts. Focusing on the three options mentioned in this article, however, is sufficient in getting your business out of debt.
Take action today; don’t delay. It’s the worst mistake you can make in managing your debts.