Last updated on March 31st, 2020 at 01:02 pm
It’s actually quite for the small business owners to bear the burden of debt that they ought to bear through the initial years. Being a business owner your very first steps to cope with debt is to develop the right repayment strategy.
However, you have to be careful about not hampering your credit score or losing out on business after working so hard on setting it up. Although the following methods are great for getting out of debt with your business, if you’re in the retirement stage or nearing retirement it may be best to sell your business to pay off the debts and enjoy a stress-free environment for your golden years.
However, knowing whether this is the right decision to make is difficult, so click here to decide when is the right time to step away from your business. Regardless, if you’re not in the position to sell right now, read on for some great tips on how to get out of debt.
Check Out a Few Key Ways of Repaying your Business Debt:
Going by the stack method you can actually pay off debts bearing the highest rates of interest ahead of those that yield lower rates. This method runs opposite in nature to that of the Stack Method. You’ll need to save an extra amount for repaying the debt that charges the highest rate of interest. But in doing so, you’ll need to continue making payments worth the minimum amounts for all accounts. You can move on towards repaying the account with the second highest balance once you’re done with the highest one.
Online loans charging separate rates of interests are often combined by the small business owners into one big loan worth a lower rate. This type of loan consolidation is identical to the process of debt consolidation pertaining to individual consumers. The loan repayments are collected by a debt consolidation company after negotiating a new rate and then used for paying off all previous creditors.
Investing in some negotiation training not only helps you to close deals at the height of your business’ success, but it also helps you to get out of financial difficulty like this, which is why it is recommended to all budding entrepreneurs. Debt consolidation is one good means of replacing old loans with new ones for the business owners.
The fact that you’re required to meet only a single bill every month saves you a lot of hassles. Likewise, your overall interest rate falls after your debt gets consolidated.
Cutting of Costs
You must follow a few concrete steps that restrict unnecessary spending on the various business areas if you really wish to lower your business debt. SMBs are known to curb operational costs by selling off all equipment or fixtures that remain unused for long. They can do it by increasing the sales volume by opting for some advanced marketing drives or by restricting their team size. Discussing with the suppliers might even help in curbing the costs.
Among all debt reduction strategies, the popularity of the snowball method has grown as it encourages repaying accounts with smaller balances ahead of those with larger balances. Once you’ve met the card balance reflecting the smallest amount, you’ll be in a position to take up the next lowest balance. It will then be easier for you to pay it off as you can contribute the minimum payment of your earlier debt towards this one. You’ll see more money in hand when you’re actually prepared to repay the larger balances shown in your accounts.
Chapter 13 Bankruptcy
Although Chapter 13 Bankruptcy is not favored by many, it actually gives excess power to business owners for repaying their debt without inflicting any loss of property. Filing Chapter 13 bankruptcy makes it easier for businesses to provide their creditors with a repayment schedule. Usually, the small business owners are known to allocate a portion of their future earnings (up to five years) for repayment of debt.
There are a few demerits of Chapter 13 although it seems more beneficial than the other types of bankruptcies. This option compels a business owner to undergo a more stringent scrutiny from the trustee. In addition, businesses often find it tough to thrive and maintain their staff when much of their funds are directed towards debt repayment.