It’s almost impossible to run a small business without Debt. A business loan, line of credit, or credit card can be beneficial when it comes to hiring new employees, purchasing equipment, and financing growth opportunities. But before you realize it, the Debt can get out of control, and it may seem as if no end is in sight. However, you can take steps to become debt-free. The key is to determine which methods work for your venture.
Your Debt may result from disorganized income or income that wasn’t optimized for paying off your Debt. By following these seven tips you have a chance to get your business out of the red simply.
1. Create a Budget
One of the first steps to getting out of Debt is to create a budget to help you see where your money is going and what you can do to save more. Sort your debts according to interest rate and monthly payment, including outstanding amounts due to vendors, business loans, lines of credit, and credit cards. This can help you prioritize which debts to address first.
2. Get a Handle on Invoicing
When businesses don’t have a good handle on their invoicing, it can lead to late payments and unpaid invoices, which can quickly add up and put a strain on the business and any outstanding debt. Furthermore, unpaid invoices can damage relationships with suppliers and customers, making it difficult to do business in the future. This is why it’s essential to take control of your invoicing.
You can use accounting software or outsource invoicing to a third-party provider. If you’re a bare-bones operation, you may want to use an invoice maker online to quickly design custom invoices. Templates make this an easy solution when you add your design and then fill in the rest.
3. Reduce Costs and Overhead
Be creative and think about ways to cut back on business spending. A time of financial difficulty also requires that you properly analyze and prioritize what you need. Look for anything that can be eliminated from your budget to save money. Even the things you think are necessities may not be as critical as you think they are.
4. Increase Revenue
Consider using promotional tactics to increase your business’s Revenue. You might offer a discount or coupons to help boost purchases and Revenue. Promotions can motivate people to seek out your business. The more money you make, the more funds you can allocate to paying down your Debt.
5. Consolidate Debt
Debt consolidation is a popular financial solution that can help you eliminate Debt. It’s an option to seriously consider if you struggle with payments or have high-interest rates on your credit card balances. A professional can help you devise a plan to get out of Debt faster and more efficiently.
6. Seek Grant Opportunities for Small Businesses
There are many grant opportunities for small businesses. All sizes and industries are eligible for these grants; however, you must prepare an excellent business plan before applying. This plan needs to depict the structure of the business, the market research, and the milestones. Additionally, when applying for a grant, identify and apply for grants within the appropriate industry sector.
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7. Choose a Tax-Friendly Business Structure
There are also several benefits to using an LLC as your business entity type, including flexibility and protection of your personal assets if there’s ever litigation against your business. An LLC also offers excellent tax advantages and makes it easier to file taxes.
You can hire an attorney to handle the paperwork, or you can do it yourself, but consider using a formation service to do it for you efficiently and cost-effectively. Typically, a standard formation for a Legal Zoom LLC can run around $1,047, which is high, so do your research to find the best deal with a reliable service.
Reduce Debt and Grow Your Business
In this current economic environment, most small business owners are uncomfortable with their debt levels. However, with hard work and commitment, you can reduce Debt and grow your business. This starts with creating a budget, updating your invoicing, reducing costs and increasing Revenue, restructuring your business, and looking into grant opportunities. By taking a measured and dedicated approach to reducing your Debt, you can position yourself for success.
This is a guest article written by Ted James. Ted is a professional financial counselor and coach holding an MBA in Finance, but rest assured he does more than just help you create a budget and send you on your merry way. Ted’s specialty is helping individuals and couples of all ages and backgrounds afford the life they want to live and feel empowered when it comes to their finances.
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