Getting started can be the most challenging part of running a business, especially if you’re starting from scratch and just got your business loans. As a startup owner, you pay close attention to your business expenses and profits. When you run out a bit of luck, there comes a time when you face challenges paying off your business loans on top of personal debts or home loans.
Keeping the business up and running with personal debt may seem impossible, but it’s definitely not the end. Facing problems doesn’t mean you’re not able to get back up again. If you’re on increasing debt, remember what you need that for. Think about its benefits and take advantage of them.
Taking Advantage of the Debt
A business loan should balance your uneven cash flows since you got that loan to purchase a piece of equipment or hire more people to improve your business. Now that you got what you need but still have uneven cash flow, it can be an indication that you have to change your ways before cutting expenses. This is why you need to fully understand your situation before proceeding on a move you’re not entirely sure of.
Taking on debt to improve your business makes more sense than saving until you can afford something you require. Whether you need to expand your space, perhaps a second location, hire more staff or purchase more equipment, debt can help you expand at the right time and keep you on the road to growth.
Cutting Costs and Increasing Revenue
If growth still doesn’t happen for your business after taking advantage of the debt, then it’s time to cut costs and increase revenue.
You don’t have to give up everything you worked for to reduce your costs. It can mean just switching to a more affordable supplier or buying secondhand equipment. As a business owner, you should know that prices are often negotiable, and you can use your skills to negotiate and evaluate your vendors and make a better deal.
As for your services, you can get your customers to pay earlier. To earn money faster, you need to encourage your customers to pay more quickly, too. Shorten your payment terms and perhaps make up a policy that they’ll get a penalty for an additional charge if they pay later than required.
Get exposure from social media promotions to get more attention from interested consumers to increase revenue. People these days are adventurous and always want to try something new and different brands that are out in the market. Promotions can encourage them to buy your product. However, be careful of offering too many discounts because that might be too costly.
Another thing you need to be careful of is neglecting the quality of your services. Some companies prioritize marketing and advertisements while the quality of their products and services diminish.
Prioritizing Your Debts and Loans
Since these are your main problems, prioritizing them is just right. Once you’ve reduced your costs and successfully increased your revenue, the amount you earn from that should go to your debt. Before you proceed, you should already know which loans and debts are most critical, even before you decide to cut costs.
Think about the debts that can ruin your business rapport with someone else, such as vendors and outsourcing hires. This is why you have to keep in touch with them no matter what. Thus, they know what to expect. Reassure them you’re doing the best you can as you renegotiate some new terms. Once this becomes successful, your partners will put more trust in you and be willing to do more business with you.
Consider critical debts that have interest rates and penalties. Clearly, the more you make them wait, the more it costs you. Therefore, they need to be prioritized, or the more you cannot afford to pay them off. If one of their penalties is to take back the money you bought for equipment, you’ll be more screwed.
The Bottom Line
If you’ve thought of it, there is no one to prioritize loans and debts. You’re the one who understands your business the most. Therefore, you should know which ones are to be prioritized. If the worst comes to the worst, you’re going to have to get money from your personal pocket if you think that’s what’s best to keep the business running.
There can also come a time when you don’t feel motivated to keep going any longer, but you have to remember why you started your business in the first place. Take a deep breath, take yourself back to the basics, and work your way up to what’s causing your problems. Down that train of thought, you can get to solving your problems. Remember that you’re not alone in this as well.