We speak to a lot of small and medium-sized business owners here at Creditors Relief. We get asked a lot of questions. But if we had a nickel for every time someone asked us “How can I get my business out of debt?”, the entire office would have retired already!!
It’s perfectly common for small businesses to have debt. That’s why we get asked the question so much! The trouble is, quite a few businesses have more debt than they can handle. According to research by Experian, small businesses have an average of $195,000 in debt.
That’s a lot of debt to pay off. And remember, that’s just an average. If your business is burdened with a lot of debt, paying it off can seem like an insurmountable task. You probably think that it will take decades to pay off. Maybe you think you’ll never pay it off. But it doesn’t have to be that way. With the right strategy, you can remove the stress of juggling debts and could become debt free in under a year.
How? By using one of the strategies that we outline below.
The best ways to pay off business debt
Reduce your expenses
The first step in becoming debt free quickly is to create surplus cash flow. With more cash available, you can afford to pay off more of your debt at once. While some may advise you to increase your prices or your sales to increase your cash flow, we think it’s a better idea to reduce your expenses. The reason is this: unless you just increase your prices, any method of increasing your sales would likely involve some kind of investment in marketing and advertising. While you may see a return on this investment in the form of increased sales, it is not guaranteed. Therefore, you could be wasting money that could go towards paying off your debt. By cutting your expenses, however, you are guaranteed to create surplus cash flow. The more you cut costs, the more cash you have to pay off your debt. There’s no risk involved. After you reduce your expenses and have additional cash to put towards your debts, you can use one of the strategies below to become debt free quickly.
The snowball method
Who didn’t love building snowmen when they were younger. Okay, maybe excluding our friends in Arizona and the other western states. But the rest of us learned an important lesson about momentum at an early age. When you were building the snowman’s body, you’d start with a small snowball and after a few feet of rolling it would quickly turn into a huge snowball. The snowball method applies this same theory to paying off your business debt. The procedure is to make a list of all of your business debts from the smallest to the biggest. You then make the minimum payment to all of the debts and focus on paying off the smallest debt first. Once that debt is paid off, you can take the money you were using to pay off that smallest debt and add it to the next smallest debt. The idea is to create a snowball effect whereby your payments get larger and larger with each debt that is paid off. When you get around to tackling your biggest debt, you will be well on your way to paying it off quickly.
The stack method
This is essentially the reverse of the snowball method. Some financial experts claim that the snowball method doesn’t add up, and you’re much better off focusing on the most expensive debt, rather than the smallest debt. With the stack method, you sort your debts by interest rate, highest to lowest. Instead of paying off the smallest debt first, you first pay off the debt with the highest interest rate. The theory behind the stack method is that this debt is costing you the most money, so it makes sense to pay it off first. Once you have paid off this debt, you should then focus on the debt with the second highest interest rate, and so on until all of your debts have been paid off.
While the snowball and stack methods focus on paying off one debt at a time, debt consolidation can help business owners pay all of their debts off at once. When you consolidate your debts, you take all of your existing loans and refinance them into one single loan that has lower interest rates and more flexible payment terms. So instead of having to pay interest on every loan individually, you now pay a much smaller amount of interest on one single loan. This doesn’t just save your business money in the long run; it makes your business debt much more manageable. With your debts consolidated, you don’t have to worry about deciding whether to pay off the smallest debt or the highest interest rate debt first -- you just have to focus on paying off a single consolidated loan.
But what if you didn’t have to pay off your debts in full at all? If you are a candidate for debt settlement, you may be able to come to an agreement with your creditor whereby you only pay off a portion of the debt by a fixed date, and then the debt is considered settled. By working with a business debt expert to settle your existing debts, you could significantly reduce the total amount you owe and repay your business’s debt load much quicker than you ever could have imagined.
If you’re looking to pay off your business debt quickly, you need to speak to a debt professional. At Creditors Relief, our business debt experts have helped hundreds of businesses across the country settle and consolidate millions of dollars’ worth of debt. Your business could be our next success story.
Take the first step in paying off your business debt today. Give our consultants a call at 877-312-6478 for a free consultation during which we will create a budget for your business and analyze which of your debts we can consolidate and settle.
A debt-free future begins today. Call us now.