According to U.S.A. Today, on average, small business owners in this country are $195,000 in debt. Not all business debt is bad because businesses need loans in order to get supplies, sign leases and hire employees. Debt helps get many startups off the ground. The problem occurs when debt piles up and inhibits cash flow.
Colony Associates, a company that has solutions for small business owners and consumers who are heavily in debt provides the following advice for construction company owners who are trying to pay off debt.
Scrutinize Your Budget
Sadly, according to Small Business Trends, 61 percent of all small businesses do not have a documented budget to follow. Writing down your budget and carefully scrutinizing expenses will help you decide where you can trim costs, saving some money. If debt is harming your cash flow, you will need to utilize the money saved to bring down your debt.
Entrepreneur Magazine suggested potential ways of freeing up cash include leasing a smaller office space and selling newer equipment and buying used. Employees that can work remotely will likely prefer to do so, reducing the need for office space.
Provide Incentives for Prompt Payment
In a slowing economy, businesses can get their clients to pay more promptly when they offer incentives to do so, like a small discount.
Boost Sales
Another means of getting more cash on hand to pay down the debt is to more effectively utilize social media for advertising, which cuts other advertising expenses. Many companies today are reaping the benefits of timely and helpful responses to all social media posts about your company as well as by utilizing influencers to help better interact with your customer base.
Decide Upon a Debt Payment Schedule
Nerdwallet suggests that small business owners evaluate which debts to prioritize. For example, debts with higher interest rates need to be paid off first. Servicing those interest payments is very expensive.
Lower Debt Interest Rates
Many business owners have business credit cards. They are a convenience and helped many businesses stay afloat when credit dried up during the last recession. The problem is that the interest rates on business credit cards have risen in the past decade. Currently, many business credit cards carry interest rates from 15 to 20 percent. At such high rates, it inhibits business cash flow, and it becomes incredibly difficult to ever pay off the debt.
Popular means of reducing interest rates on debt include:
Zero-Interest, Balance Transfer Credit Cards: If your business credit is good, you can apply for a zero-interest, balance transfer credit card. They defer any interest payments on the balance for 12 to 18 months. They are a good option if you can pay off the balance in the interest-free period. You do need to be aware of the fact that they will revert to current interest rates after that period of time.
Signature Loan: Companies like Colony Associates provide signature loans for small businesses that provide one monthly debt payment at a lower interest rate. The longer term for the loan improves the cash flow of your business while also providing a debt payoff date.
If your construction firm is struggling under heavy debt, call Colony Associates. We provide solutions that improve business cash flow, while lowering interest rates