Six Way To Dig Out Of Small Business Debts
Growing business debt can be a nightmare for small-business owners especially with creditors knocking on their doors and prices for everything from materials to health care on the rise.
Due to substantial small business debts, last month 8113 businesses nationwide filed for bankruptcy protection. This is a 57 % increase from a year ago during the same time, according to Automated Access to Court Electronic Records, an Oklahoma City bankruptcy data and management company.
One option available to small business owners to resolve their issue with small business debts is to file bankruptcy, however this process may be quite expensive. The court filing fee and attorney fee may add up to $8,000/$9,000. Of course, there is also a negative impact on the business as well as the owner’s personal credit scores.
To avoid bankruptcy, below are a few ways in which small businesses may come out of debt without filing for bankruptcy:
- Reduce unnecessary costs and free up some cash
Attempt to pinpoint the parts of the business that got the company into debt, and attack them head on.
- Take a look at the budget once again
If the debt keeps accumulating, it simply means that the company’s current budget isn’t doing the trick. Develop a budget based on the business’s current financial situation. Ensure that your business revenues exceed your fixed monthly costs. Then allocate a portion of the budget for variable costs, such as manufacturing materials.
- Prioritize debt payments
Deal with the businesses highest-interest rate debt first. This means most of your energy will be devoted on paying down credit cards. However, if you’ve signed as surety for any of your business debts, ensure that you prioritize payment of these debts, as creditors may come after your personal assets.
- Communicate with your creditors
Inform your creditors of your predicament. You may be able to negotiate a repayment plan with them or a reduced settlement amount. However, bear in mind that the worst thing a business owner can do is enter into a repayment plan with a creditor and then default.
- Consolidate your loans
Consolidating your loans means that you only have to deal with a single creditor as opposed to many, it may also allow you to reduce monthly costs without injuring your credit.
- Seek Credit Counseling
Sometimes creditors may be difficult and unwilling to negotiate with you. In such cases it may be wise to refer your issues to a reputable debt counseling firm who may be more successful than you in negotiating with your creditors. For example, these companies may sniff out inefficiencies and negotiate better payment terms with creditors.
If you are a business owner struggling to stay afloat and would prefer to avoid filing bankruptcy, our debt relief lawyers can help you. Schedule your free consultation with one of our lawyers if you have been faced with a business lawsuit, defaulted on your business loan or simply cannot afford to pay back your creditors.