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5 Simple methods to dominate your business debt

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If you have business debt, you are not the only one with this problem. About 49 percent of all business owners find that it is hard to manage their existing debt. Handling it can be one of the hardest challenges you can face as a small business owner.

When there is no way out, many businesses might declare bankruptcy. But it is harder to just declare business bankruptcy with today’s laws, which is why you have to work with a reputable lawyer to do so. Bankruptcy can affect your company’s reputation and your credit scores, making it almost impossible to get your business going again. The good news is that you can control your debt before being controlled by it.

1. Pay Off Debt by Increasing Your Income

It is never ideal to be in debt, so you should make paying it off a priority before deciding to hire more staff or move to another building. Try increasing your company’s productivity. Consider offering training to increase the skill levels of your employees. New marketing initiatives might help bring in more clients. Even if it costs more now, you can use the increased profits to pay off your loans.

Try to renegotiate the vendor terms. Properly managing the payable accounts might increase your cash flow while making it easier for you to pay down debt. Some suppliers also offer more time for you to make payments after delivering services and goods. On the other hand, you might be able to get a discount for early payments, which could be around 2 to 10 percent. Look around for suppliers that will offer better rates.

Try to turn over inventory faster since stagnant inventory might drain your resources. Monitor the inventory closely and get it as close to the anticipated demand as possible.

2. Do Research Before Taking Out a Loan

Before ever applying for a loan, you should calculate the debt coverage ratio. That determines how easily you can pay it back. This is also used by your lender to determine the terms, interest and amount of your loan.  You might want to try to get a larger loan, but you should be safe. If the debt coverage ratio shows that it could be a stretch, you might struggle when paying back the money, even if you seek fast online cash loans.

3. Future-Proofing Debt

The interest rates on loans are continuing to increase. When the interest rates get higher, companies that have high interest rates will be susceptible. Consider getting a fixed rate interest loan, which will allow a lender to maintain the rate for a certain period. That way, even if the interest rates go up, you will still be paying the same amount.

4. Asking for Lower Interest Rates

You do not want to pay high interest rates on your loan, and if you miss payments, you might find that the interest rate is higher. Try to pay off the credit card balance each month to completely avoid extra charges.

Unfortunately, debt can snowball as the balances go up. Look at your highest-interest debts and try to pay those down first. That can be challenging for some companies, so consider doing a balance transfer. That involves consolidating your credit card loans on one card that has a lower interest rate.

Don’t be afraid to ask for a lower interest rate. If your credit score is good and you have paid on time before, you sometimes can get a lower rate by asking. Even if you only reduce it by 1 to 2 percent, this can still save you quite a bit each year.

5. Consolidating Your Loans

One of the easiest ways of lowering the interest rates is by consolidating your debt. Instead of making several payments that have different interest rates, you can consolidate it to one loan with lower interest.

Let’s say you have a few debts with high interest rates and your monthly payment is $1,200. If you consolidated it and had a lower interest rate, you might get the payments down to $750 each month, which would let you save around $450 each month. You could then put this money toward making more than the minimum monthly payments. Talk to your company’s financial advisor to see if this is the right option for your small business.

The choices that you make now will affect both your business and personal finances. Consider your resources and look at your options before deciding on one solution. Try not to spend more than what you earn.

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