You're running a small business and have borrowed a lot of money for setting it up. Now you have incurred debt due to borrowing huge amount. This situation is very common these days when you want to be an entrepreneur while having poor knowledge on managing money. Make sure , if you want your business to be successful and flourishing, there must not be any debt in it.
It is wise on your part to follow some business rules in order to develop your business with every passing day. When you plan to expand your business, you need to have the necessary cash in your pockets. But you will find that most of the time, there isn't enough money to invest in your business. To manage this money, you either take out a loan from a bank or any other source such as your friends and relatives. You need to keep in mind that you have to repay the amount within a limited time period in order to avoid falling into debts.
There is always a solution for everything and if you’re in your initial stages of financial trouble, you can easily minimize the risk.
Boom your business while avoiding debt trap
Check out the ways you can manage your business and money as well.
1. Cut down unnecessary costs
Try to identify the areas where you can cut down the extra cost such as costly phone service, unnecessary big office spaces to reduce financial burden. If there are unused equipments, then sell the off to get some money.
2. Pay bills on time
Try to pay all the necessary bills on time. Do not forget to pay your clients on time. You should pay the cost of the space where you are doing your business, the materials that you need in your business and the loan amount that you may have taken out.
3. Borrow for the genuine reason
When you need to borrow money for your business, you should borrow only for the right reason. You should use your business credit cards and purchase necessary things for your business when you can get the items at a discount price. In case, you find that you have sold plenty of products on a particular day, make sure you have extra products to satisfy the demands of other customers. However, you should repay the amount that you had borrowed as soon as you earn the amount by selling your products.
4. Set an advertising strategy
Success is not static in a business. You may go down in your business and face financial issues.Try to get help of your friends and relatives and formulate plans to intensify your business. You can use some of the business strategies and also promote your business where you don’t have to spend much. The promotions can be done by any of your close friends. You can also participate in community networking such as raising money for cancer patients and at the same time publicizing about the services provided by your business. If you have a restaurant, you can start a catering business too.
5. Borrow the minimum amount
You should learn to borrow only the minimum amount in order to sustain your business. You will find most of the loans that you take out to grow your business come with high interest rate and as such, it will increase your debt problems. It is important that you borrow only the least amount that you may need in order to develop your business.
6. Refinancing your loan
Talk to your banker about the debt if you incurred in your business and tell about your financial situation to your banker. Ask him if you can take out a refinance loan to re-establish your business. With the help of the loan, try to pay off your debt and build your business in a new way. Don’t forget to have a good budget plan to pay back the loan in the stipulated time. If you’re successful in paying back your loan, you’ll have a good rapport with your bank and may also get financial suggestions from the bank.
7. Make a wise decision
The money you need to borrow to start your business should connect with the experience that you have and the knowledge with your industry. If you have a flourishing business, then you can borrow as much money as want so as to provide fund for expanding your business. You should remember that you need to pay back the money at the earliest time possible. However, if you have very less knowledge about the type of business that you want to start, it is important that you borrow the amount as less as you can. Try to keep in mind that the lesser mistakes you make in borrowing money, the lesser amount of debt you will have to pay back.
8. Negotiate with your customers and suppliers
Try to directly negotiate with your customers and suppliers regarding discounts on goods if you buy in bulk. That will help you save money as well. If you had a good payment history, you can ask for flexible payment. You can also have other small businessmen as partners for making large number of purchases at lower price.
9. Ask for suggestions
Be open to any suggestions when you’re facing money problem. Ask from your friends and relatives about what improvements you can do to rebuild your business. You may find many good ideas which will help you when you’re re-establishing your business. Try to connect with your customers over social networking sites and ask suggestions on how you can improve the look of your products or any of your business strategies. You can ask for their feedback on your products.
There are ups and downs in business. You may incur debt for many reasons and some of them may have been incurred without your fault. Correct business strategies will help you flourish in your business and you’ll see that in a matter of no time you’ll out of debt worries.