There is nothing more exciting than running your own business. In almost every business there are good days and bad days. There are times when things are going well and occasions when you struggle to make any money. As long as you keep following the right business strategies and maintain a good cash flow, you will do well.
Many businesses make the mistake of taking on debt early before they can think about whether or not it’s even worthwhile. Racking up credit card debt or taking out business loans can put an additional burden on your business.
There’s no simple solution to getting out of debt.
Here’s a look at the different ways to Get Your Small Business Out of Debt
Refinancing with a business debt consolidation loan…
Refinancing your business means replacing your old loan with a new loan. A business debt consolidation loan has lower rates than your present loan(s), requires lower payments and has longer terms.
There are many companies that provide the option of refinance with a business debt consolidation loan. Basically when you choose this option, you can make smaller loan payments at lower interests over a much longer period of time – which should suit you perfectly.
However, refinancing a business may not work when your current loans carry high prepayment penalties and have no early payoff discount. Also, you should make sure that with refinancing, all of your earlier loans are paid off; otherwise, what’s the point, right?
Apply for a Loan by Offering Your Property As Collateral
If you own the real estate on which your business is based on; have a second home or an investment property, why not offer that as collateral to get a secured business loan at better terms from the lender?
You can then use this loan to pay off your earlier debts. This makes sense if you are confident about making the loan payments on time. We know many business owners who have used this option to reduce their monthly loan payments by as much as 60 percent.
Just one thing – don’t put up your house or primary residence as collateral. It is one thing to lose your business if you’re not able to make your loan payments in time, quite another to lose your house and become homeless. Don’t make that mistake!
Renegotiate Your Debt
This option may or may not work. If you believe that you’ve been saddled with highly unfair terms by the lender, or have been misled by the salesperson or company who gave you the loan, then consider your options. Renegotiate with the lender and ask for more favorable terms.
If there is one thing you should learn from what happened in the aftermath of the 2007-2008 subprime mortgage crisis; it’s that regulators don’t take kindly to lenders that take advantage of their customers’ ignorance or desperation.
Ask for Advance Payment on Invoices
Find a way to get paid early on invoices. This is a great way to keep your cash flow steady. Rather than waiting on the traditional Net 30 terms, you can negotiate a faster payment by being proactive.
Apply for a Business Loan against your Equipment
Did you know that you can use your equipment as collateral? Underwriters use collateral to mitigate potential risk and help you get approved. When you have challenged credit, you can usually get approved if you have collateral or a cosigner to help you out. Tread wisely, in the event of a default – your equipment will be up for grabs.
Bottom line: Exploring additional income sources to pay down your businesses debt should be a priority over turning to credit to get things handled.
TIP: Do you have a business where you use trucks or heavy machinery? You can use your equipment as collateral against the loan for more favorable terms.