As a small business, you might struggle to keep up with bills. Fortunately, understanding your financial challenges will help you find a plan that works for your business. In this blog post, we discuss how to guide your small business through these tough times and get back on top of things!
Understand the Core of the Financial Challenges
The first step to overcoming the debt is to understand what is causing your financial deficits. Many factors may contribute to this, such as a cash flow shortage, unexpected expenses or operating losses due to unforeseen risk.
For instance, if there were an increase of competitors in your industry that caused lower revenue for yourself, it would be wise to explore how best to deal with these changes while still maintaining profitability.
Discuss Favorable Payment Options With Creditor
Do not become intimidated by creditors. If it’s been a while since you have had a face-to-face meeting, take advantage of this opportunity and ask questions like “What type of repayment plans do I qualify for?” or “How much more time would my monthly payments add to my term?”
If you have already been in contact with your creditor, there are a few other options that may help. First, consider asking for an extension on repayment terms or higher monthly payments to give yourself more time.
You could also ask them about deferring or rescheduling some of your debt – this option would require consolidating all loans into one loan at a new interest rate (which can be beneficial because it lowers the total amount owed).
Lastly, they might offer short-term forbearance, which only temporarily suspends payment while still accruing interest- this option is a last resort. The bottom line is: do not be afraid to approach your creditors! They want satisfied customers and will work with honest people- if you are willing to work with them.
Furthermore, when all else fails, you will have to declare bankruptcy. Your situation will determine your choice: consumer proposal vs bankruptcy.
Renegotiate, Refinance or Consolidate Bank Loans
Financial experts suggest that small businesses struggling with debt should consider renegotiating, refinancing or consolidating their bank loans. When your company is having trouble balancing monthly payments and needs to reduce the number of monthly instalments, this can be an option worth exploring.
Sometimes, it may make sense to create one loan out of several smaller ones and repay them all at once. As a result, you’ll have only one debt to the crediting bank.
Increase Your Revenue
Increase your revenue by implementing marketing strategies that will allow you to increase sales. One such approach is to use search engine optimization and on-page tactics. Another idea would be to leverage social media platforms to grow your customer base and brand recognition with those already familiar with your offer. In doing this, take advantage of what each forum has available:
- Facebook ads can help drive traffic from outside sources.
- LinkedIn provides excellent networking opportunities.
- Twitter helps keep people updated about current events related to your industry while also providing access to influencers within it.
Increase Your Profit Margin
Always be aware of your margins, and if you’re constantly operating at a loss, it’s hard for your business to stabilize and keep going forward. So, your business needs higher profit margins to avoid going out of business or getting into more debt. The best way to increase this profit margin can vary depending on the industry but typically involves lowering costs or increasing revenue.
Raise Funds to Pay for Past-Due Debts
If you’ve been struggling to pay your past-due debts, it’s time to start looking for ways to raise funds. There are a few strategies in which you could accomplish this:
- Sell some items – It may seem like selling some company liquid assets might add up quickly when bundled with other items. Plus, let’s face it; you must have equipment that you don’t use anymore.
- Don’t give up hope – your situation might seem hopeless but don’t lose faith just yet. Instead, take bold steps and seek help from family and friends. After all, most of the prominent businesses were on the verge of bankruptcy before their success.
Hopefully, you have learned a few strategies on how to guide your small business in challenging debt situations by now. Unfortunately, although manageable, financial challenges are part and parcel of business, and you will have to seek a competent accountant to prevent total bankruptcy.