How to Reduce Debts While Growing Your Business
Research from the U.S. Bureau of Labor Statistics (BLS) suggests that about 20% of new businesses collapse in the first year, 45% collapse within five years, and about 65% within ten years. It indicates that only 25% of all new businesses make it to more than 15 years. This research also shows that one of the reasons for this is debt and the inability to gain funding.
There is always a financial risk for business owners. No matter how smart you are with money, expanding your business means you need a stable flow of capital. That is why you take out loans. However, how do you manage your business when you take so many loans; they almost swallow your business?
Relevant Resource: How to Future Proof Your Business Finances
Ways to Reduce Business Debt
Growing your business requires you to create a long-term plan and put your loans to good use. It also requires that you separate your finances from your business finances by creating merchant accounts. These accounts could help you manage what’s yours and what’s for your business. When you have so much debt, how do you grow your business?
1. Be smart with inventory orders
When you order for poor-margin items, it may cost you more as they could yield unprofitable sales. They are lower-priced products that should be eliminated for quality yet cost-effective ones. Watching your inventory means you’re looking into every product you buy, and you’re also selling them.
When you stock up more than you need for a season, you could run into a loss. For instance, it’s a general rule that prices go up during Christmas. If you stock up more than you can sell, you may run into a considerable loss.
2. Build your credit
A credit score of over 700 for your business will do you some good. One of the ways to achieve this is by paying your debts early. It will help you find reliable borrowers, perhaps, flexible. It will make it easy to secure future loans and manage your debt.
3. Debt consolidation
It’s a strategy to get all your loans into one. By this, you can consider utilizing business debt solutions such as debt consolidation. With business debt solutions, like those offered by reputable providers such as “business debt solutions,” you can take out a big loan from one lender to pay off all your existing debts. Debt consolidation loans can affect your credit score, but if you don’t miss any repayments, they can help you effectively manage your business debt and ultimately contribute to the growth of your business.
4. Assess interest rate
Don’t take a loan that will destroy you with its interest rates. Interest rates are the enemies of your business, which is why you must negotiate for low-interest rates. It will also help you plan your funds. If you’re investing an amount of money in expanding your business or purchasing a huge product at a discount, you can calculate the profit and maximize it to repay your loan.
5. Ask employees for advice
To prioritize your debt, you must pay them. What happens when you run out of ideas? You have employees and credit advisors; ask them their opinions on growing your business and managing your debt. It would help if you told them to speak freely; after all, you want to save the company that feeds them. Asking for their opinions can help you find ways to save the business from collapse to huge debts. You can even offer bonuses to any employee who provides the best suggestion.
Aside from these five ways, create projects which will generate capital for your business. If you notice that you’re no longer getting customers, start a marketing campaign to reach new customers. You must not forget to pay your debt when they’re due. All these will help you maintain and grow your business.