Whether you are a big company or a small one, it is very important to know the tips and tricks of Business Indebtedness. Filing for bankruptcy is an effective way for small to medium business owners to get out of debt. However, this can affect their credit scores and cost a lot in attorney fees. In light of these difficult financial times, there are some tips and tricks of Business Indebtedness that can serve business owners in a tight financial spot.
You may start with cutting unnecessary and excess cost and free up liquid cash, review your budget, prioritize your debt payments, speak with your creditors, consolidate loans, and last but not least speak to a legal professional for help.
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If there is a specific part of your business that contributed to the company being in debt, take a hard look at those parts of your business. Customers not paying on time or expenses being too high both are common problem for small businesses. A way out of these is stepping up the process of collection and cutting down unnecessary expenses like expensive phone systems or office space. Selling off of scrap or unused equipment is also a good way to free up liquid cash.
If your company goes deeper and deeper in debt then it is time to review your budget. Take into account the present financial situation of the company and create a new budget that meets all your company’s needs. Fixed monthly costs such as utility bills and rent should be paid with the revenue you earn. A portion of your budget should be allotted to variable costs like manufacturing materials. Whatever capital is left after paying all this should be allotted to paying off debts. For credit card debts, the trick is to pay off more than the minimum due. This will keep your credit in good health. This will ensure that your debts don’t keep piling up and take years to pay off. If you do not want to engage an accountant to do your debt management, you can use software available online to do this.
If you have many debts, take care of the debt that has the highest interest rate first. Credit cards are the primary source of high interest debts. This will mean that you will have to pay off those debts first. If there is a personal guarantee on any of your debts, that is, if your things and personal assets can be taken away if you don’t pay a debt, it is advisable to pay off those loans first.
Let your creditors know about the difficult financial position you are in and inquire about their hardship plan, if they have one. This could provide you with some breathing space and better and easier terms of payment. A better payment plan or a smaller settlement amount might also help in faster and more efficient way to Business Indebtedness plan. Be upfront about your situation and the fact that you will be able to pay the debt faster if the terms are eased. Once it is done, make sure you fulfill your commitment to the deal. As a business, you cannot afford to default on payment terms or revised payment schedule. Consolidate multiple short-term loans into one long-term loan payment. This will reduce costs incurred every month.