5 Ideas for Reducing Company Debt
Being in business requires overcoming many challenges that present themselves during the growth cycle. One of the biggest challenges is managing debt and using it productively to increase your company’s income and generate more profits. However, some company’s find themselves in scenarios where they have over-extended their credit facilities and face severe repercussions if they can reduce their debt to sustainable levels. Here are five ideas you can use to cut your debt down and keep your cash flow positive.
#1 Classify Your Debts
Take stock of your current financial situation and make a list of all of your creditors. Prioritize the accounts that charge high-interest rates on outstanding loans. Make sure that you pay these debts off first before any others and put all of your spare cash into settling these accounts as fast as possible.
#2 Consolidate Outstanding Debts
Speak to a micro-lending professional about how to consolidate debt and other credit facilities into one favorable settlement. With a consolidation loan, you can pay off all your creditors and improve your credit rating, while negotiating new terms on the capital you are financing. This refinancing can save you money on your monthly payments and increase your free cash flow.
#3 Don’t Let Your Creditors Down
The health of your credit record depends on your ability to service your debt. Therefore; it is critical for you to meet the minimum payments on your credit facilities every month. If you are aware that you are going to be short on a payment at the end of the month, then take a proactive stance and call the creditor straight away. Explain your financial situation and agree to new settlement terms. Most creditors will be able to help you out because they realize the pressures on small businesses in today’s economy.
#4 Create a Budget and Stick to It
Your business should have a solid financial plan that you adhere to without fail. Create a budget for every department and make sure that the departments do not over-extend their budgets through frivolous spending. Take a look at where you are spending money and find areas that you can cut back on. Are you sure that you are using the cheapest supplies? Could your telecommunications packages be cut down? Do you use all the bandwidth and cell phone minutes on your contracts? Could you downgrade your company car to a more affordable model?
This content is for paid members only.
Join our membership for lifelong unlimited access to all our data science learning content and resources.