Tips for managing business debt
One of the most important factors as to whether your small business survives and thrives is how well you can manage its debt. Business owners of small business especially have to be careful about how they deal with the debt they take on for their company. You must be able to successfully manage the business debt or you may find that you have to close the doors to your business. Debt management can be especially difficult for small business owners due to the limited amount of resources and overwhelming number of challenges that they must deal with. This can include problems like having slow accounts receivables or having to much inventory on hand. However, the good news is that there are ways that you can increase revenue and reduce costs that will in turn help you manage your business debt. Here are some tips for managing business debt-
- Keep track of your interest rate-Many business owners do not keep in mind that the true cost of debt is the interest rate that you paying. You want to make sure that you are getting the best deal possible on your business debt. This all starts before you meet with a potential lender. Reviewing your credit report and making sure that you have the best credit score possible will help you in getting a lower interest rate to begin with. Over time you want to check current interest rates and make sure that your interest rate is falling in line. If you find that you are paying to much interest on your debt then its time to consider refinancing or finding a lender who offers you a better deal.
- Get the best deal possible from your vendors-A large part of business debt is often the accounts payable to suppliers. You need to make sure that you keep this amount down as low as possible. The key to successfully getting the best supplies at the best deal is to shop around. You need to make sure that you know what the market price is for the supplies that you are buying. Then when you choose a supplier you should not hesitate to ask for discounts especially if you are buying in bulk or have been a long term-on time paying client. Keep in mind that if you are a small business you may receive a better deal by partnering up with other businesses to buy in bigger volumes.
- Take a close look at office space-The physical space for your business is most likely its largest expense. Whether you are buying your space or renting it there are ways to reduce the cost. You may want o consider downsizing, leasing unused space, or simply renegotiating terms with the bank or the landlord. All of these measures can help to reduce the amount of debt that you have for your business. Keep in mind that if you free up money that you were spending on physical space you can use it elsewhere to reduce business debt.
- Make an appointment with your banker-Many small business owners overlook the fact that their banker offers a variety of resources beyond simply loaning them money. Your banker most likely will be able to provide you with ideas and resources to help you reduce and better manage your business debt. Your banker may be able to even facilitate introductions to business contacts that can help you reduce your business debt. Sitting down with him or her can lead to a productive discussion that will help you to take better control of your business debt and better manage your business finances.