Small businesses often start with a mountain of debt. These debts are hardly uniform or homogeneous in nature. In most cases, a single company turns to several organizations, non-profits and credit unions for small and medium loans. Then there are the ubiquitous small business loans from banks and the SBA. Unprecedented financial crunches often compel businesses to run to payday loan companies and invoice factoring firms for quick cash. Each one of these comes with different interest rates, APRs, and payment dates. For many businesses, meeting payments each month is not difficult, but it is indeed challenging for them to keep up with each payment deadline and interest calculation while accounting for the cash flow deduction.
When a business opts for debt relief, it is not a sign of failure or loss. It is instead a sign of a smart business owner. An entrepreneur, who knows when and how to ask for help, often fares a lot better in the financial market as compared to other business owners who wait for bankruptcy to descend upon them. Debt relief is any service that can help your business to successfully troubleshoot all debt payment problems and meet all payment requirements on time.
What is the true nature of business debt relief?
Debt relief for one business can be drastically different from another. For SMBs, debt relief can mean debt consolidation loans, debt management, debt settlement or debt counseling. The kind of service your business needs right now will depend upon your unique financial needs. High-interest debts and variable payment cycles often call for debt relief for enterprises and start-ups of all sizes.
Revisiting your business expenses
It is a step that you need to take before availing any new small business loan. Knowing your current costs and profits will help you manage your business budget. Identifying the sources of cash flow can improve your business finances drastically. Sometimes, all you need is an expert’s eyes on your accounts to help you meet your payments and move forward to the next leg of your business.
One of the best ways to contribute towards efficient financial management is by eliminating unnecessary expenses. It can be as simple as reducing printing costs and switching to energy conserving lighting fixtures. Begin with the least critical tasks that take up too many resources in terms of time, energy, effort and finances. Then proceed to the tighter areas if your business finances stop showing improvement. You can also try to boost the rates of your products or services after a quick market survey and competitor study. You can find several online marketing tools that allow comprehensive competitor surveys at low expenses. You can turn to social media marketing to boost organic traffic to your business website and cut down on traditional advertising costs.
Debt consolidation and refinancing business trades
Business trading and operations require financial support from various sources from time to time. However, after 3 to 4 months, the payments of these loans start disrupting the business processes by creating unwarranted payment requisites. Business debt consolidation can help entrepreneurs to keep their heads above water. You can easily reduce your monthly payments by using smart business calculators and by checking the latest debt consolidation updates from the likes of
While most entrepreneurs see Small Business Administration (SBA) loans as primary funding options for small businesses, these SBA loans can also serve as consolidation loans to reduce business payments. They come with easy payment options, reduced monthly interest rates, and typically more extended repayment terms. You might find it difficult to qualify for the SBA loans, but there are several other personalized loan options for business owners that can address your increasing debt concerns.
Try to negotiate repayment terms
This process is quite a risky one and experts only advise this if your business is genuinely strapped for cash and debt consolidation loans will not take you far. Revisiting the repayment terms with your standing creditors can sometimes yield better payment rates and lower interests. You can even manage to get extended payment periods if you have a debt management company in your counsel.
Creditors prefer clients who are upfront. Even in the case of a temporary financial crunch, you need to communicate the nature of your crises to the creditors. Start by requesting small changes in the payment schedule or a marginal reduction of the interest rate on the individual loans. It might seem like a small step, but when you consider multiple small and medium loans that amount to a high amount, the reduction of even a fraction of the rate can mean significant savings.
You might wonder what you can leverage to convince your creditors to change the payment dates. In most cases, creditors and business trade partners have a significant stake in your ability to pay. They are more likely to adjust the payment schedule than see you default on a payment. You can always use this point for convincing them to revisit your payment dates. When you have higher business credit scores, your business trade partner is more likely to change the terms of payment. It can mean better rates and extended periods for payment. You may get more favorable terms depending on your FICO score.
In the end: Create your own debt management plan
Once you have a new payment schedule, interest rate, and maybe even a debt consolidation loan, it is time for you to start with a new debt management plan. Several nonprofit credit counseling organizations help entrepreneurs to create new business budgets. They can help you to manage your business credit cards, other revolving lines of credit and unsecured business loans.
It is always smart to opt for budget management after you have consolidated your outstanding lines of credit and high-interest loans. It will keep you from spiraling back into debt. Professional counsel will also help you improve your business credit score over time. Most importantly, choosing the right debt counseling service can help you outsource your business trade payment responsibilities and creditor management.