Reducing Business Debt: Recovery for Small Business Owners.

Increasingly small businesses are looking for funding to consolidate their debts, as owners feel the burden of the slowing economy, and greater financial expectations in coordination with a drop in consumer spending and a stagnant expansion of industries. Within the economic cauldron business are often not exempt from personal liability as stakeholders and senior partners regularly invest their personal wealth into the success of the business. It is unsurprising that the UK records of £154 million of personal debt increase every day and that a normal return of investment can no longer be guaranteed on key commercial projects.

Business debts are increasing but not all debt should be viewed with grave concern. A level of operational debt is in some cases highly necessary, to propel your business off the ground and to keep a business operational during changes to the economic landscape. Expansion is also another key area where a loan for the new office opening can yield untold benefits six months later when the business is able to increase its turnover and market clout with exciting new teams on board.

The critical point to adhere to with debt management is the control of the debt, allowing an acceptable operational level whilst avoiding the trap of financing interest payments only each month. Business debt and personal performance levels must also be separated and avoid the relationship between debt levels stress, which could in turn affect your decision making, reputation, and ability to keep key clients.

Here are some key issues and the recovery methods explained.

Business Debt Issues.

  • Excessive borrowing means potential cash flow issues.
  • No contingency fund available.
  • Stakeholder Confidence.
  • Inability to Invest.
  • Reduced Service Quality.

Recovery Methods.

Increase Income – This can achieved through a variety of ways that are bespoke to your business. Popular methods include cross selling to existing customers, offering special deals to undercut the market, and seeking referrals from industry contacts. Alternative sources of income are often underestimated and are not in the typical box of thinking but by using the advertising space on your website for Google AdSense and renting our additional office space you can significantly increase your incomings.

Reduce Costs – Two principal ways to do this are by looking at big savings and making reductions across the board. Targets 10% of savings for different departments and opt for cheaper across the board savings such as transport and purchasing equipment.

Restructure Liabilities – The amounts you owe to other people can be restructured to provide you with a disposable income and reduce the amount of debt to provide a working capital. Try replacing existing loans with lower interest loans, secured loans against the property and long repayments schemes to keep costs down.

Restructure Assets – If the business has any unnecessary assets such as used cars, surplus equipment and outstanding invoices, this should be pursued to look at raising capital.

Raising Capital – Acquiring new investors, venture capitalists and obtaining grants can be a great way to boost your business income and whilst this may not be possible in every circumstance, why not consider assessing your own assets list and whether it’s possible to convert them into business opportunities.

This article was contributed by – James Barnett, a writer on behalf of Cooper Matthews researching debt reduction strategies for small business owners.

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