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Keeping Your Business Out of Deep Debt

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(Photo Mix, Pexels)

31 Oct. 2020. To avoid debt completely is an almost impossible proposition for some business owners. Thinking of your business, for example, it might be that you have had to incur some debt because of a startup loan or a mortgage on your business premises, for example.

However, it is possible to avoid getting into deep debt, by which we mean the situation where you are genuinely struggling and unable to find a straightforward avenue out of your problem.

By following the steps here, you should be able to avoid such a pitfall and instead be rewarded with the financial harmony that comes from a well-managed business.

1: Choose a loan that you can afford

If you do need to take out a loan, be that a business loan or a credit card, look for those with competitive rates of interest. So long as your credit score is healthy, you shouldn’t have any problems qualifying for something. If you know you can afford to pay back more than the minimum each month, you will pay your debt off quicker, and avoid late fees and visits from a collection agency. So, shop around, or consider our next step when trying to fund your business.

2: Look for loan alternatives

You don’t always need to take out a loan when trying to fund your business, as there are alternatives. You could borrow from friends and family, for example, as they are unlikely to charge you interest. You could also use a crowdfunding platform to raise money, as you might attract people to your cause if you offer them shares or other rewards pertaining to your business. There are some funding ideas here, including the ones we have just mentioned, so consider their viability before doing something that could land you in debt.

3: Keep an emergency fund

You might be forced into debt if your business was hit by an emergency. An equipment breakdown, a cyberattack, or another lockdown situation are just some of the external factors that could derail your finances. However, if you had an emergency fund in place, you wouldn’t need to take out a loan (or a second loan) to dig yourself out of trouble, as you might have enough money set aside to save you.

4: Think before you spend

Do you really need to buy that expensive piece of equipment? Or would it be cheaper for you to hire it? Do you really need to outsource some of your business tasks? Or do you have people in your employ who can take care of them for you? Do you really need to move into bigger business premises? Or will a reshuffle of your furniture and personnel give you all of the room you need? These are just some of the questions you might need to ask yourself when thinking about spending, so think before you make a decision, as wiser choices could lead you away from deeper debt.

So, don’t land your business in deep debt. While there is help available if you do, your best course of action is to avoid such a situation completely, for the benefit of your finances and your sanity. Consider our suggestions then, and seek advice from people you know who are savvy with their finances.

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