Running a small business isn’t easy. There are so many tasks to handle and issues to solve that it can feel like walking a tightrope with no safety net. Managing your company tasks becomes even harder when you’re dealing with debt. It’s like trying to spin plates while walking that same tightrope. Unfortunately, it’s a situation that many small business owners find themselves in. If you’re trying to balance debt on top of running your business, it’s time to take action. Here are a few steps to help you put down the spinning plates and get back to business:
1. Evaluate your debt. It can seem silly, but you’d be surprised at how far off your mental image of your debt may be. Add up your total debts, then compare it against your monthly fixed income and accounts receivable. By figuring out your monthly liability, you’ll have a clear idea of how much you owe. This can help you determine a plan for dealing with your debt.
2. Come up with a plan. In general, there are two ways you can find more money for your business. The first way is to cut expenses. Either choose a large expenditure and eliminate or cut back on it, or institute cuts across the board. Find places to eliminate outgoing money and use your savings to pay off your debts. The other way you can get more money is by, well, earning more of it. You can raise your prices, try to increase sales, or find an alternative source of income. You may have to get a little creative, but if you can earn money to start paying off debts, you’ll be in much better shape down the road.
3. Restructure your assets and liabilities. You can sometimes find money by rethinking how you’re dealing with assets and liabilities. Get rid of unneeded assets by selling off old equipment or turning your investments into cash to pay off your debts. Restructure your liabilities by speaking with your creditors. You may be able to obtain better repayment terms or a lower interest rate, both of which can go a long way toward making your business financially stable again.
4. Take drastic measures. If your business debt has spiraled totally out of control, it may be time to take drastic measures. Closing or selling your business can help you get debts off your shoulders. Declaring bankruptcy may also be a viable option, although you’ll typically still have to pay the debts through a repayment plan. It’s worth noting that if you run a sole proprietorship, creditors may be able to lay claim to your personal assets in order to pay off your business debts and vice versa.
If your business in drowning in debt, there are options that you can pursue. Try to pay off the debt if at all possible so you can get back to business. If you’re in need of a more dramatic solution, it may be worth considering. Although losing your business can be heartbreaking, it may be better than trying to dig it out of a huge debt-shaped hole.
About the Author
Carly Lance is employed by Personal Bankruptcy Canada (www.personalbankruptcycanada.ca), a company of experts in the bankruptcy and insolvency act. She also thinks of herself as a personal finance junkie and loves to blog about saving money, frugal living and getting out of debt whenever she can. She believes a happy life = happy finances.
© 2012, Carly Lance. All rights reserved.