Business debt can give a lot of business owners sleepless nights. If you’re new to running a business or, perhaps, have owned your business for a very long time, you may find yourself feeling helpless when your debt gets out of hand.
The last thing you should ever do to pay of business debt is use your own money to pay it back. So, if your business is struggling to pay the bills and the debts are piling up, here are some methods you can use to get your business back into shape:
Look into CVA
A CVA (Company Voluntary Arrangement) is a great way to relieve some of the pressure that comes from business debt. It’s an agreement that you make with your creditors, settling on a structured repayment process that will cover either part of or all of your debts.
If your creditors agree, you can pay them back over a fixed period of time and with the consent of your creditors your company can continue with trading like normal.
If you can afford to pay at least 75% of the debt then this is an excellent option for you and your business because it allows you to pay your debt back steadily and avoid liquidation. In order to qualify for a CVA you need to be an official company and have the consent of all the directors/members of your company.
Monitor your expenses
Keeping an eye on what you’re spending money on and exactly how much you’re spending is the first step to making wiser financial decisions. There may be some costs that are unnecessary or ineffective. You might find that you’re overspending in certain areas in your business. Perhaps you can find an alternative supplier for your equipment that can offer you better prices.
Don’t let your costs creep up on you. If you make smart moves towards spending less money you may find out that fixing your debt is a lot easier than you initially thought. Perhaps you had the money to pay it off all along but were spending it on the wrong things.
Reduce costs and increase income
Reducing costs is one of the most obvious ways of making debt repayment easier, but it’s not always a feasible option. You can either cut one or two big costs or cut small costs across the board. Unless you have can afford a loss of something expensive in your company, cutting small costs will always be the better option because they don’t have such a severe effect on your business.
These costs could be as simple as reducing the amount of equipment you buy or cutting back on luxuries. Or, to even out all of your losses, you could agree to reduce a certain percentage of your budgets. Of course, reducing the costs in your company will only do so much. In order to get noticeable results you will need to pair these measures with measures to increase income.
In order to get noticeable results you will need to pair these measures with measures to increase income.
You could increase the price of your products or services, increase your sales through wisely invested marketing, or you could found an additional source of income by renting out office space or selling advertising space on your website.