As the owner, learning to deal with your business’s debt, will not only allow you to feel more in control of your business as a whole but can help you set yourself up for growth, success, and expansion. The thing about debt is that it’s inevitable, most businesses, especially small ones, have it. Being in debt or having financial leverage is a key component to growth and success, this means that if you don’t have the capital to back up your ideas you might not see that much growth.
While some debt is good when you’re trying to build a business from the ground up, small businesses can often become overwhelmed by it. Too much debt and too many forms of debt (i.e. credit card debt, personal debts, and business loans) will ultimately hinder the success of your business.
Some initial debt is ok and a normal part of running a business but eventually you need to deal with it. If your business’s debt has become too overwhelming to deal with or you feel as though you need to rethink how it’s affecting your business then you should consider restructuring or consolidating your debt to make it more manageable (learn more about debt consolidation here).
When it comes to your business’s debt load, you need to consider a few things before you decide how to move forward. Follow these steps to help yourself better understand your business and how its debts are affecting its success.
There is nothing worse than trying to deal with bills, payments, and all the paperwork that comes with running a business when you’re unorganized. Getting organized should be your first step, make piles, sort through boxes, and make sure you have everything you need. This will make the process of managing your debts much easier to handle.
Next, you need to determine exactly how big of a hole you’re in, how much debt you have, and how badly it’s affecting the success of your business. You need to know what’s going on before you can create a plan to fix it. Things that are unorganized or ignored often seem worse than they actually are.
This is where Excel or some type of spreadsheet program comes in handy. You need to create a document that lists all your debts into categories, consider the following categories:
Once you have a better understanding of each of your debts you’ll be able to use the tools available to you to come up with and execute a great plan.
Now that you know what you’re dealing with you can create a plan of action that will help you pay off your debts, restructure them, or get the help you need. Since your business, its debts, and how you run it are all unique, so will your plan. Here are a few questions you should ask yourself when creating your plan of action:
Just remember that it’s normal to feel overwhelmed by debt; just don’t let it stop you from taking action.
Once you’ve figured out how you want to handle your debt, you should do some research and figure out what your options are in terms of:
Look for businesses that specialize in helping small businesses deal with debt and accomplishing their goals. Do not settle for anything that you are not comfortable with, you’re trying to improve your business so only accept the best.
Gone are the days when banks and other big financial firms were the only options available to small business owners. Today there are countless alternative lenders and financial firms who specialize in working with small businesses to help them achieve their goals and deal with their debt.
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Caitlin Wood is the Editor-in-Chief at Loans Canada and specializes in personal finance. She is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. Caitlin has covered various subjects such as debt, credit, and loans. Her work has been published on Zoocasa, GoDaddy, and deBanked. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security.
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