Liquidating debt will lower costs
Here’s a step-by-step plan to help you reduce your business debt, so you can reclaim your sanity and start focusing on other important tasks. But in some cases, what feels like overwhelming debt is just disorganized income, or income you haven’t optimized towards paying off debt.So, first things first: examine your current numbers and make a new small business budget.A hardship letter may also help to support your negotiation efforts with creditors.Just be aware that renegotiating the terms of a loan is likely to ding your credit score, so it’s best to use this tactic when you’re not planning to apply for additional credit in the next year or so.Plotting the end date, plus a few other “debt repayment goals” in your calendar, will keep you motivated and help you measure how well you’re doing with your loan repayments.Here’s what a simple debt repayment timeline would look like if you paid off ,500 in debt over the course of three years.
For a fee, they will negotiate with collection agencies and creditors on your behalf in order to extend or change your existing credit agreements. Find ways to spend less and you’ll have more cash to reduce small business debt. If you don’t have the time (or willpower) to do this manually every time you get paid, set up an automatic transfer from your bank account so you don’t feel tempted to keep the money in your account.
If you have a relatively new business vehicle or other large items in your business, selling them—then leasing them back from the original vendor—could help you cut down spending.
Run the numbers to make sure this strategy makes sense in the long run before you make the switch. We have a bunch of ideas on how to reduce expenses in our Small Business Owner’s Guide to Cutting Costs.
Sending loans to collections represents a huge loss for lenders; the last thing lenders want to do is send a collections agency after you.
Explain your financial situation and ask your lender if they can be flexible with late fees, restructuring payments, and even renegotiating your interest rate.