What if you have taken out debt and things do not go as planned? Unmanageable debt can screw up your business before it emerges as a brand. In the beginning years, most entrepreneurs take out debt to expand the business, but most of them remain unpaid causing stress, anxiety and depression. Studies suggest that the significant reason for being under the endless pressure of debt is having no financial clarity and late payments.
This magnifies when you mix together your personal and business finances. You use your personal credit cards, short-term loans and overdrafts to finance your business that imbalances cash flows. First you need to understand that your business has a separate identity. The business budget must be different from your personal budget and the funding sources will be different too.
Small businesses often struggle to collect payments from their customers that keep them from paying off their dues on time. Lack of negotiation skills, unethical practices and unequal relationships push small entrepreneurs on the verge of collapse. Well, you cannot totally rely on payments due from your customers. You should figure out some other ways to get out of debt.
Have more revenues
Debt builds up in that you are running out of money. Try to find out some methods to increase revenues of your business. Promote your business as much as you can. Advertise your products on different social media platforms. Media exposure will evoke interest in a large number of audiences for your products and services. Study the behaviour of your targeted audience, know what they want and how they can benefit from your product. Once you know what appeals to them, your sales will amplify.
If your product has great competition, you can fix your prices a little lower than your competitors. Of course, you will have to have a large produce to meet the demand. Per unit will let you earn a little amount of profit compared to your competitors but the higher demand will offset that loss. If you are providing a unique product or if your product has some features that your competitors are not providing, try to sell them at high prices. You are likely to have a great number of customers who will pay what you quote.
Chase your customers to pay
There is no point running a business if you are not paid, but you are not in for a timely payments from your clients despite invoicing early. Whether or not clients are generous and fully understand their financial obligation, polite reminders are not enough to get money out of their pockets. In a business when you are looking to establish a long-term relationship with your clients seems to be very challenging to decide the right time to take strict action against them although there are a range of options available from a debt collection agency to starting a legal proceeding.
A debt collection agency takes the burden from your shoulder and collects all types of dues from your customers. Depending on the time, age and financial condition of a borrower, the agency may sometimes allow them to pay less than the due amount. Make sure that the agency does not charge more than what you will get from your debtors. You can also take advice from a solicitor on how you can push your clients to reimburse what they owe. At last, you can take them to court. Well, whatever the policy you opt for having money released from your debtors, you cannot be aggressive. Make sure that you have delivered material or supplied a certain thing as per the term and condition of the contract.
Cut down on expenses
A debt repayment is extremely painful. If you are juggling with multiple debts, you have to be more careful with your finances. Make a budget to find out total expenses you are incurring every month and examine which are necessary. Look at your financial statement to find out what is contributing to your debt. You are likely to find many expenses that had nothing to do with your business operations. Make sure that you do not repeat those mistakes. Give priority to only those expenses that are relevant with the business operations.
Some entrepreneurs in the UK take out no credit check loans with no guarantors to finance their business because they do not require any collateral. Such kind of a loan is easier to have approved than a business loan, but it is repaid in full. If you have cash shortfalls, you will fall behind repayments and eventually the debt will mount up. If your business needs money, try to apply for a business loan from reputed direct lenders like London Loan Bank. These loans allow you to repay the debt in instalments, hence much more manageable.
Negotiate with your creditors
Your obligations do not limit to direct lenders as your creditors list will also have names of people who do business with you. Obviously, they will never want your business to go downhill because it will also affect them. If you take material, try to convince them to allow you to pay in two instalments like once in two-week period.
If your lender is charging late payment fees with each missed repayment, do not delay and immediately talk to them. Tell them about your genuine financial condition and ask for any other repayment plan that could help you get out of debt. Ask your lender if they could allow minimum repayments and lower interest rates. You should try to get a better deal. For instance, you can opt for a 0% balance transfer deal, debt consolidation loan. Whatever the deal your lender provides you with, make sure that this time you successfully reimburse your debt.
Running a business is not easy. You must follow a professional approach if you actually want expand your business. Stick to the term and condition mentioned in the contract that you agreed upon with your debtors and creditors beforehand to maintain cash flow.