Markaaz’s team of experts shares their top advice on how to get your small business out of bad debt and back into the green without relying on loans
Running a small business is exciting and challenging, and borrowing money may be part of your successful growth plan.
Economic downturns and soaring inflation – as is happening in Q4 2022 – can hit business income and growth plans hard and leave a small business drowning in debt it cannot afford to repay.
Debt will affect your business credit score and ability to get future loans, credit cards, rent a building, and more. While your small business may put you in debt, and you may not know how to fix it – Markaaz can help. Read on to learn more about small business debt and how to get out of it.
Why do small businesses get into debt?
There are many reasons small business debt can happen, from bad ideas to poor planning and business management to simply having the right idea at the wrong time. No matter how your small business got into debt, getting it out of debt and back on track is essential.
Let us run through our top 5 tips on re-building your small business and getting out of small business debt.
Top 5 tips to get out of debt as a small business:
1) Contact your creditors to discuss repayment terms:
Your creditors don’t want your business to fail – and get paid nothing. They are often happy to discuss better rates, a slower payback period, or better terms to ensure your small business survives and you can pay them back.
2) Reduce your expenses
You will have to slash operating expenses to get back on track. Go through your monthly expenses with a fine comb, look at your types of expenses, and cut back on anything you do not need to keep your business running.
You may need to move to an all-remote work model, remove your office rent from your expenses, or perhaps slash that advertising budget. Pull in your top customers to be your advertisers – they are your best advertisement.
3) Prioritize expenses
Look at your income and critical business expenses as a small business owner. Go through your income statements and see exactly where you are with income and loss, then work out where you can trim. Work out which of your bills are essential to pay to keep your business running and which you can defer.
The bills you must pay include the following:
- Paying your staff
- Pay your essential business bills (power, internet, product)
- Pay your taxes. Do not delay
- Pay your key suppliers, but if you can, wait until the deadline day to give you some more time
After those bills, prioritize those loans with the highest interest rates. It is a great idea to sit down with a finance professional to ask for help if you need help figuring this out.
4) Boost that revenue in any way you can
Simple on paper but hard in real life! Trim your prices, offer promotions, and partner with other companies to get the word out.
Networking and marketing right now are your friends. Use your social accounts and networks to build a wider audience and sell more. You need to make sales to stay afloat and refill your working capital, so get rid of that old or extra inventory and turn it into cash.
If you have old promotional items or products you no longer need, try to sell them on a site like eBay.
5) Get a second job
Get an after-hours job, or sell your skills on Upwork or other freelance platforms. Getting another job will help you boost your revenue. Find something that works around the hours you need for your business. That way, you can ensure your small business stays afloat and trim down that debt.
It is essential for small businesses to keep a close eye on their cash flow and payment commitments. It allows you, as a small business owner, to know when your costs are increasing, and you can up your prices and implement money-saving strategies before you end up in bad debt. On the Markaaz Dashboard, we allow you to track your cash flow and provide you exclusive access to curated financing to grow your business.
Head on over to the Markaaz Dashboard and see what we are all about!