How To Effectively Manage Business Debt

There are many reasons why a business needs to take on debt, and they’re not all bad! Maybe you took out a small business loan to get your business off the ground, you had to finance some new equipment, or you just lost your biggest client and need some additional working capital until things turn around. Whatever the reason for taking on debt in your business, it is important to have a plan in place to manage it. Here are 4 tips to help:

  1. Make sure all your debt information is in one place. Create a spreadsheet with the creditor, type of debt (Loan, credit card, line of credit, etc.), interest rate, and monthly payment. 
  2. Understand the reason for the debt – are you struggling to manage cash flow and needed to cover your bills and payroll this month? Was there a one-time expense, like a re-brand or purchase of equipment, that is unlikely to arise again in the foreseeable future? Knowing why you had to take out debt in the first place will help you either manage it or get control of it if it’s becoming a problem.
  3. Reduce spending and increase income – if the reason for your debt has to do with cash flow problems you need to get your spending in check and try to increase your revenue. Cutting out unnecessary expenses, negotiating with vendors, raising your prices, and improving your invoicing and collections is a great place to start. 
  4. Reach out to your creditors – if your business debt is starting to feel overwhelming, reach out to your creditors. You may be able to re-negotiate your interest rates, adjust your monthly payments, or consolidate your debt into one with better terms. 

Debt can absolutely serve a purpose in your business. In fact, having some debt is necessary for establishing healthy business credit. If there’s a plan for it, there’s no reason for you to lose sleep over taking on debt. 

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