When you pour your heart and soul (and capital) into a business, the last thing you want is to see it crumble under the weight of debt. Debt recovery for small businesses is mercifully pretty similar to Debt Relief for individuals, albeit on a slightly larger scale. It’s about finding the dead weight, cutting it, and doing the legwork to rid your business of crushing debt.
It’s hard work, but you’re a small business owner. You’re no stranger to hard work.
If your business is facing bankruptcy due to the heavy weight of debt, read on for the best tips for commercial debt recovery.
Before you do anything else, take stock of your debts and what balances you are carrying. Put them in order of interest rate, and start aggressively paying off the one with the highest interest rate.
Once that one is done, throw everything at the next debt, then the next, until they are all paid.
But before you can throw anything at your debts, you have to take control of your situation. Here are 5 tips for debt recovery for small businesses.
This may sound tough, but whatever you do, do NOT create more debt while you are trying to struggle out of existing debt.
Do everything you can halt new debt at the moment. You can always replenish savings or cash reserve, but the more debt you accrue, the harder it is to get out.
Now, this is a lot easier said than done. If you are trying to get out of debt and having trouble, chances are you don’t have the capital necessary to keep your business running on your own. But that’s where the next step comes in.
Time to take a look at your books and see where you are spending too much.
You’ll want to take a look at financial statements going back about six months to see where the dead weight is coming from.
Once you’ve identified what you can jettison, do it. Remember that lean times in businesses are temporary, and just because you have to get by without something now doesn’t mean you can’t add it back in when the business is doing better.
Work on bringing in extra cash. Sell off office equipment you aren’t using, and run specials to bring in more business.
If you have clients that are late paying their debts to you, you’re going to find it harder to pay off your own.
Go through your accounts and contact clients who are late paying. Whatever their reason for not paying, recovering money owed to you should be one of your top priorities. Commercial debt recovery will help bring in the capital needed to pay off your own debts.
Remember that you are not allowed to harass people, so keep communication short and to the point. Use both phone and written communication, and keep records of when communication is sent and if payments have been made.
If necessary and you can afford it, hire a collection company. Just don’t go into more debt to do so.
It is so important to keep your creditors aware of what is going on. Call them and explain the situation and the steps you are taking to remedy it. You may find that credit companies are more than willing to work with you.
You may be able to have interest rates lowered or payments deferred if you take the time to just communicate with your lenders.
You may even be able to settle part of your balance. You just need to make it clear that they will get paid much more quickly if they are willing to work with you.
If this part makes you nervous, it is worth looking at a commercial debt recovery company. They often specialize in helping you negotiate terms with creditors to help you dig out of debt.
Look at Loan Consolidation
Sometimes it is in the best interests of your business to combine your debts into one balance. It’s easier to pay that way and may lower your total payment.
It will also give the advantage of paying off creditors right away, so collection efforts from your lenders should stop.
Loan consolidation may keep you in debt longer, but it doesn’t hurt your business’ credit and will help make your debt load more manageable.
Business debt can be frightening. As a small business owner, having your is business going under because of debt can destroy your life and make it difficult to make a living going forward.
But you don’t have to fall victim to bankruptcy. Use the tips above to get rid of your business debt.
For more information on debt recovery for small businesses, contact us today!