Being successful in business doesn’t mean you must eliminate all your problems. It just means that you have to crush your problems down into smaller, more manageable pieces. One of those issues could be eliminating business debt.
The most important things in business are adaptability, leadership and cash flow. Business debt affects all these areas and eliminating it should be a top priority.
The Ins and Outs of Business Debt
There is some business debt that is good and there is some debt that is bad. The key is to know why you have the debt and having a plan to manage it.
It is critical to pay attention to your business debt monthly. Is it going up or down? Which debts should you pay off first? Often an accountant can tell you how much debt your business should have.
The biggest mistake that business owners make is to think that increasing sales or revenue is the most important goal. In reality, you should eventually want to increase net profit. If you cannot accomplish this immediately then you should certainly strive to do it in the next few months.
If you bring on debt to increase sales that eventually allows you to pay off debt then that is a good investment. On the other hand, if you are bringing on debt and that debt lasts more than 12-24 months and net profit hasn’t improved, then you have too much debt.
You have to look at changing your business model if the debt isn’t being paid down. This is especially vital if you are also not growing.
Perhaps the most sensible way to eliminate debt is to make some hard decisions about expenses. However, the toughest thing for any business owner to do is to cut expenses. This is because business owners are typically optimists. Still, it’s crucial that you don’t let this hopefulness overshadow your better judgement. By combining practical sales forecasting with proactive ways to get your account receivables payments quicker, you can avoid overspending and accumulating massive debt that you can’t handle.
Why You Must Eliminate Business Debt
To increase your financial wellbeing
When you are busy paying down debt, you cannot use that money for anything else. This can stunt your growth and cause you to miss profitable opportunities. The less money you use to pay off debt means more cash that you can funnel into other areas of your business. One of the uses for this extra cash should be stashing money away for a rainy day.
To decrease your stress
Anytime you owe money, it takes its toll on your anxiety levels and peace of mind. If you have too much stress, you are not doing your best work and your business will suffer. Stress can also steal your focus and cause you to make poor decisions. In addition, you don’t have to worry about losing your assets to the bank because you can’t make the payments.
To upgrade your credit score
In business, just about everything you do will depend on your credit score. If you want a small business loan, the bank will check your credit score. When you contact a vendor or supplier, your business credit score will be put under a microscope. To get the best interest rates, your credit score must be excellent. Carrying too much debt will have a negative impact. Reducing business debt will raise your credit score and open up a world of possibilities for your business.
To develop good spending habits
Once you start to pay down your debt, you will want to keep it that way. Having extra cash feels pretty good. As a result, you will better track your spending and be less likely to purchase frivolously.
To make it easier to borrow in the future
The need to obtain a fast business loan is something every business will experience in its lifetime. Nevertheless, the ability to actually qualify for a loan is something most small businesses cannot do. In many cases, a poor debt to income ratio is to blame. Banks have plenty of reasons to deny your small business loan application, such as not having enough collateral or lack of a solid business plan. Don’t give them another reason by having too much debt.
To free up your cash
Almost everything you do for your business requires cash. Making payroll, purchasing inventory and especially paying off debt cannot be done with a credit card. The sooner you repay your debts, the more cash you will have for other programs and projects. That’s why it’s crucial to not only eliminate business debt, but to do so quickly.
How a Line of Credit Can Help with Business Debt
Launching a new product, expansion and attracting new business are just a few of the ways for your business to grow. Most of these activities are not possible without some form of working capital. This helps you avoid taking money from other areas of your business to fund new initiatives. When you do this, the area where the money is taken will suffer. Instead, consider a line of credit.
It is really hard for any business, small or large, to grow the company without a line of credit (LOC). A LOC allows you to handle the inevitable ups and downs in cash flow.
If you get a line of credit, which is a form of debt, you shouldn’t be using it for long periods of time. In addition, don’t use it to mask a poor business that isn’t making money.
Some people believe that getting a LOC is equivalent to trying to plug the holes of a sinking ship. In fact, the better your business is, the more important it is to have a LOC in place. Having a LOC is a sign of strength in a business, not a weakness. It demonstrates that you are taking charge of your small business finances and will always have cash on hand to keep your business afloat.
Who Can Give You a Line of Credit to Eliminate Business Debt?
You probably already know that it’s next to impossible to get small business financing from a bank. It’s easier to get blood from a stone. The process becomes even harder if your business is in debt. A bank will consider your business to be too much of a risk and deny your application.
There are numerous companies that offer debt consolidation help as well. This is fine if you feel that you are drowning in debt and having trouble keeping up or making the payments.
However, if yours is like many small businesses, you may just need some extra money to catch up on bills and even out cash flow. That would give you enough of a cushion to pay down and then eliminate your debt. For this circumstance, a business line of credit might be your best option.
Today, the best place to go for a line of credit is an alternative lender. They have more favorable policies and terms than you will get from a traditional bank. Many entrepreneurs have found success by using a business cash advance company, like Financing Solutions (www.financingsolutionsnow.com).
A line of credit from Financing Solutions will give you the flexibility and quick access to cash that you need to grow. You can use the money for a variety of business expenses.
Most importantly, with a line of credit, you only need to go through one approval process. Then, the line can stay open for 12 months. If you choose to renew after that, we make this easy as well.
What makes a LOC ideal is that you only pay interest on the money you withdraw. It’s free if you don’t use any of the funds. In addition, if you pay the money back quickly, this is short term business financing that is convenient and inexpensive.
How to Eliminate the Competition
Stop chasing the wrong customers – you may think that every customer who turns to your competition is a loss. Sometimes, these customers take your time and resources away from true prospects. In pursuing the wrong customer, you could lose the right ones in the process. If you can’t meet their expectations, provide value to them or make a profit, it might be time to let them go.
Offer something your competition can’t – find their weakness and exploit it. Any area where they may be lacking and you are exceptional is an opportunity to increase your customer base. For instance, if your competitor gets a lot of business online, make it worth their while to come into your physical location. Create a special, one of a kind experience for anyone who visits your brick and mortar store.
Demonstrate your value – in an effort to win customers, many businesses sacrifice profit for sales. They base this decision on the belief that a brief loss in profit is worth gaining a new customer. In truth, what you are actually doing is proving that you don’t think your product is worth the price you are charging. As a result, customers will always expect a lower price. As an alternative, you should spend your time showing why it IS valuable. Build your brand and your reputation to a level where it is you and then everyone else. For example, people who own a Harley-Davidson will immediately say “I ride a Harley.” Others simply admit to owning a motorcycle.
Beat them at their own game – no matter what that game is, you need to have the instant business funding necessary to top it. Contact Financing Solutions to ensure you can always rise above any competitor.