Small Business Debt
There’s the old saying, “You have to spend money to make money.” In business this is true, but how much money is too much? Businesses, not unlike individuals, can sometimes accrue too much debt. Unfortunately, these are generally the businesses that go into bankruptcy and ultimately go out of business. Learning to manage business expenses and business credit is the only way to ensure you are not overextending yourself or your business.
Borrowing money is a necessary evil for most small business owners. Whether it’s to open a new business or to expand a successful one, creditors rely on these types of ventures to make their business work. If a business owner finds himself or herself in a situation where they are finding it difficult to manage their debt and meet obligations made to their creditors there are a few options outlined here:
Try to save the business – This may seem like an impossible task when there are collection agencies knocking at the door. While it isn’t easy, it is possible to take certain steps towards minimizing the debt and becoming profitable again.
By cutting back in certain areas a business can start to see some much needed immediate cash flow. This could mean selling off some unused equipment or cutting some employees – although this is a very unpopular option.
Contacting distributors and asking for discounts or payment plans is also a good place to start.
Don’t be shy about asking for referrals. You’d be surprised how many of your satisfied customers will want to help your business thrive.
Work with the bank rather than ignoring them. There are different payment plans and tricks, like loan consolidation, that creditors offer to make payments a little bit less of a burden.
Call it quits – Deciding to shut the doors is a difficult and emotional decision but once it’s made there are several options to choose from to minimize the debt and damage to personal credit standings.
Filing for bankruptcy is usually a last resort but can offer an out when selling the business is not an option. The negative impact to personal credit standings make it less desirable but when there is no other choice it gets the job done.
Liquidating the business assets and using the money earned from the liquidation to pay off debts. This requires the cooperation of creditors, however, since there is no guarantee that the amount yielded from liquidation will be enough to cover the entire amount owed. A professional liquidator like Ideal Trading can guide you through the process.
For more information on liquidation services or avoiding small business bankruptcy please visit our NEWS/EVENTS page or to schedule an appointment for a consultation please fill out the Quick Contact form to the left hand side of your screen.