4 Easy Steps to Put Your Company's Debt behind You

If you run a company and experience financial difficulties, you are likely to have already considered declaring bankruptcy as a way out. However, that doesn’t have to be the only option for your problems with your debt or invoices that still haven’t been paid to you.

Apart from costing a lot in terms of money and stress, bankruptcy has a profoundly negative influence on your credit score and business reputation, which is exactly why you need to explore every possible alternative in order to avoid having to declare bankruptcy.

Increase income if possible

Being cash-strapped might also help you look at your business from a different angle, allowing you to look harder for a solution which would increase productivity and efficiency of your production, thus having a positive influence on your income.

An increased income would not only help you pay back your debt faster, but it would also be a great incentive for future business operations. Sometimes even spending more money in such situations can improve your financial situation quickly. Namely, if you invest in new technology or employees’ training, which can improve your efficiency, you’ll quickly repay the investment and boost your business results.

Consolidate your loans

This is another increasingly popular option, where you consolidate all your loans with various interest rates into one, low-interest, long-term loan. Make an appointment with a financial adviser or book a meeting with an expert from your local bank to find out more about this option. Your aim is to keep your spending lower than your income, which is why a single long-term loan might help you overcome current difficulties.

Invoice factoring

Also known as debt factoring and accounts receivable financing, this concept allows business which provide products or services to other business and governments an opportunity to sell their invoices due in the future to a factor. The factor usually pays around 80% of the invoice’s value immediately, while the remaining 20% (minus applicable fees) is paid when the invoice is paid.

You might want to use the globally popular invoice factoring option as a solution to help you overcome short-term cash flow problems that appear because you gave your customer a chance to pay for your products or services a bit later than usual in an attempt to secure the deal and build customer loyalty.

Still, this might be quite detrimental to your business, since you yourself might not have been given extended deadlines for various bills and invoices you have to pay. In such situations, invoice factoring can help you both overcome the problems and keep a satisfied customer.

Prioritize payments

If you owe money to more than one institution, make sure you prioritize your payments. Usually, the way to go is to deal with the highest interest rate debt first, which usually suggests credit cards.

However, if you have personally guaranteed a debt and you’re running a risk of your creditor or supplier knocking on your door and wanting to take your personal assets, it’s probably best to focus all your energy on repaying this loan first, because a failure to do so would have the deepest possible implications not for you, but potentially for many others as well.

Naturally, there are other things you might do to get rid of the burden imposed on you by your debt, but choosing the right way to tackle the problem depends on many aspects of the problem, such as the amount of debt, deadlines, agreed payment structure, etc.

What is important is to do everything possible to avoid having to declare bankruptcy, since it is an option which has long-lasting negative effects on you personally and your company’s reputation, and consult an expert if you’re uncertain about what options are available and their potential implications.