The ideal businessman knows how to avoid becoming indebted. But even with all the professionalism in the world, business owners sometimes have no other choice but to seek financial help. From that moment, debt is just around the corner.
If you’re reading this, you’re probably wondering how to pay your business debt. Fortunately, there are multiple methods of doing that.
A Guide on How to Pay Your Business Debt – Methods
1. Consolidate your loans
A debt consolidation loan allows you to collect all your debts into one. The perks are the following: potentially lower interest rates and monthly payments, facilitated management of money, good cash flow.
Another advantage is that a consolidation loan does not affect your credit score, whereas missing payments on all the other debts does that.
2. Repaying the debt should be your #1 priority
You should invest all your available money into repaying that debt. It will certainly be tough for a while, but it is something you must do. This is especially indicated when the loans you’ve taken have been secured on any of your assets.
Focus on the debt with the highest interest rates at first, then move on towards the ones with lower rates. It takes time and a lot of determination, but it is doable. This method is known as “the stack method.”
3. Cut down on costs
Every cost that you can cut is more than welcome. For instance, don’t buy any additional office space when you’re indebted. Another alternative of cutting down costs and making some money at the same time is selling unused or outdated equipment.
4. Discuss the issue with the creditor
Your creditors might actually be your saviours. You can discuss your hardships with them and see if they have payment plans for people in your situation. If you’re lucky, then by no means default on that repayment plan, as it can have terrible consequences, both on your debt and your credit score.
5. File for bankruptcy
This is the last resort in this guide on how to pay your business debt. Bankruptcy is the last line of defence, as it can cover your debts. But be careful, bankruptcy is not devoid of harmful side effects.
For instance, it can impact your ability to get a loan in the future, and it might restrict you from travelling overseas. On top of that, creditors can liquidate your assets in spite of your bankruptcy. The most common asset is, unfortunately, one’s house. So you may get out of your debt, but your creditors will get you out of your house.
This is the guide on how to pay your business debt. The greatest mistake you can make is to go on a search engine, type in “how to pay your business debt” and go with the first thing that pops in your field of vision.
Debt is by no means something you should take lightly, especially when you risk becoming homeless. Proceed with care.