All entrepreneurs consider taking a certain amount of debt to good for their small businesses. However, if you take too much of it can make it difficult for your organization to accomplish its objectives and jeopardize its growth prospects. Moreover, it can serious damage your reputation. You need to realize that as a sole proprietorship concern, you and your establishment are legally identical. This implies that if your business defaults in paying its dues, your lenders and suppliers have a legal right to seize your personal wealth if your establishment’s assets are insufficient.
Leslie Hocker- Tips to Overcome Serious Business Debts
Business experts explain that whenever you face a debt crisis as an entrepreneur, you just need to roll up your shirt sleeves and keep in mind the following tips:
- Scrutinize your personal and business credit scores
The first thing you need to do whenever it comes to tackling business debt is to get as much information as possible on the scale of the problem. Start by analyzing your personal and business credit report. This will go a long way in giving you a clear picture of what you need to do.
- Start ranking your debt payment in order of importance
As an entrepreneur, you need to realize that clearing your business debts is a mind game. Rather than accepting defeat by throwing in the towel, you should rank your business debts payments according to their importance. Starting by paying off your smallest business debts says Leslie Hocker, an international marketing director and business coach from Houston, Texas. This goes a long way in boosting your confidence when it comes to tackling the business debts of higher amounts.
- Negotiate payment terms with your creditors
You sometimes need to look at your business debts from the point of view of your creditors. Try to put yourself in their shoes as consider what it is like to have a debtor who has not been paying his/her dues for a long time. After a certain point, you have no option but to consider the sum to be irrecoverable. This is the reason why you should try to contact your suppliers and offer to pay off a substantial portion of their debts.
- Track down late paying clients
In a similar manner, you should take the initiative to track down customers who owe you money and start collecting this amount. Even if they agree to settle their dues by paying 80 to 90 % of what they owe you, it can go a long way in helping you clear your business debts.
- Selling off certain assets
You should consider this only as a last option to pay off your business debts. Take some time to think of way you are managing your business. What can you do to make your establishment more efficient? Perhaps you can sell an expensive yet inefficient piece of machinery and purchase a cheaper version without compromising on the quality of your products.
You need to remember debts may be good for your business as long as they are manageable. Leslie Hocker says the above tips can go a long way in helping you to reduce it considerably. This can help to improve your establishment’s cash flow, profitability and efficiency.