Smart Ways to Eliminate Business Debt
If you run a business, you likely obtain loans to finance purchases or investments or to obtain working capital for operational expenses. However, revenue shortfalls, increased expenses and other unforeseen setbacks may cause your business to become overburdened with debt, putting it in financial jeopardy.
Filing a Chapter 11 bankruptcy to reorganize your debt may be an option, but whenever possible, it may be advantageous to reduce your business debt. There are various practical steps you can take to achieve that aim, many of which can be pursued simultaneously.
One important step you can take is to review your business’s expenses and cut unnecessary ones. For instance, you might be regularly paying for something that wasn’t as necessary or useful as you thought it would be. Or an expense that was once essential may now be unnecessary from your current perspective. Even if an expense is still necessary, you might be able to find a cheaper alternative that would serve the same purpose or that would bring only a minor reduction in quality or functionality.
Reducing costs alone is unlikely to get your business out of its financial rut. You should also look at ways to increase your business’s revenue. One way of doing so is to determine the most profitable parts of your business and to build on that success. That might require you, for instance, to market more aggressively, follow new advertising strategies or look toward providing products and services that are in greater demand. You might need to increase your expenses or incur additional debt, but the achievable rewards may justify the costs.
If a unit of your business is unprofitable or is just breaking even, you need to understand why. If it’s a promising sector of your business but hasn’t received the attention it needs to thrive, you should put more effort into improving its performance. If, on careful analysis, it seems likely to remain a drain on your finances, you should consider discarding it.
Still another option is to restructure your existing debt by refinancing, debt consolidation and similar measures. Debt consolidation bundles some or all your debts into a single payment, which simplifies servicing the debt. Effective debt restructuring can also reduce the interest rates you pay, ease the repayment schedule and even delay some payments.
If none of these steps are sufficient to ward off your debt problems, a Chapter 11 bankruptcy may be your best course of action. This will allow you to shield your business from creditors, reorganize your debts and obtain the additional credit needed to give your business a fresh start.