In business, debt can be a double-edged sword. While it can fuel growth and expansion, excessive debt can quickly become a burden and threaten the very survival of a business. This is particularly true in the B2B sector, where delayed client payments and other industry-specific cash flow issues are common. If your business is falling into a debt spiral, we are here to help. We have listed some of the best ways to manage out-of-control business debts, offering practical insights to guide you.
Key Takeaways of Managing Your Out-of-Control Business Debts
| Key Point | Description |
|---|---|
| Categorise and Prioritise Your Debts | Understand the nature of each debt and its impact on your business. Prioritise critical debts, such as high-interest loans or debts to key suppliers, to reduce overall costs & maintain business operations. |
| Negotiate with Your Creditors Proactively | Approach creditors to negotiate extended payment terms or reduced interest rates. Transparency and realistic proposals can help ease debt obligations while preserving business relationships. |
| Consider Debt Consolidation | Combining multiple debts into a single loan can simplify debt management, potentially offer lower interest rates, and provide extended and more manageable repayment terms. |
| Explore Tax Debt Loans | Consider tax debt loans to settle outstanding tax liabilities & avoid ATO penalties. These loans can provide fast access to funds with flexible repayment options, helping businesses maintain a healthy credit score |
Categorise and Prioritise Your Debts
Categorising Business Debts
Critical Debts:
These are debts that can significantly affect your business operations if not addressed promptly. Examples include loans with high interest rates, debts to key suppliers, or any debt that puts crucial business assets at risk.
Non-Critical Debts:
These debts may have less immediate impact and could include smaller loans or debts with more lenient terms.
Prioritising Business Debts
After categorising your debts, prioritise paying off those critical debts, including those with high interest rates or those that incur penalties if not paid on time. Paying these off first can reduce the total amount you will pay in the long run. Also, when evaluating your critical debts, consider the importance of the creditor to your business. For instance, delaying payment to a key supplier could jeopardise your supply chain, so such debts should be prioritised when creating a repayment plan.
Negotiate with Your Creditors Proactively
Most creditors prefer a negotiated solution over the complications of non-payment or legal proceedings. So, if you want to manage your business debts more effectively, approach your creditors proactively. Explain your current financial challenges and express your commitment to fulfilling your obligations. Honesty and transparency are key in these discussions. Then, try to request extended payment terms or a temporary reduction in interest rates. Some creditors may be willing to modify your repayment schedule to help you manage cash flow better.
You can also propose a settlement amount if you can afford a lump sum payment. Some creditors might accept a lower amount than what is owed if they can receive it immediately. But, make sure to prepare a realistic proposal that reflects your ability to pay. Overpromising and under-delivering can damage your credibility.
The bottom line is negotiating with your creditors proactively will help you find pathways to ease debt obligations while maintaining essential business relationships.
Consider Debt Consolidation
Debt consolidation involves combining various debts into a single loan, often with a lower interest rate or more manageable repayment terms. Here’s how it works and why it might be beneficial:
- Simplifying Debt Management: Consolidating your debts simplifies the management of your business finances. Instead of juggling multiple payments with varying interest rates and due dates, you deal with a single loan. This can help reduce the likelihood of missed or late payments.
- Potentially Lower Interest Rates: A single consolidated loan may offer a lower interest rate compared to individual debts, especially if your existing business debts include high-interest loans like credit card debts. Lower interest rates also mean reduced overall costs over the life of the loan.
- Extended Repayment Terms: Debt consolidation loans may offer extended repayment terms, providing more breathing room in your finances. This can be particularly helpful for businesses experiencing temporary cash flow issues.
What are your options?
1. Business loans
Any business loan with a lower interest rate and better terms can be a good option to consolidate your multiple business debts. But before signing the dotted line, calculate the total cost of the loan over its lifetime. Ensure that the consolidation actually reduces your financial burden and doesn’t just extend it over a longer period.
2. Second mortgage
Securing a second mortgage for debt consolidation can offer significant relief for businesses grappling with multiple debts. It provides access to substantial funds by allowing you to borrow against your property’s equity, potentially at lower interest rates than unsecured loans. Doing so helps simplify your repayments; you only need to deal with a single monthly payment. Also, this option helps your company avoid bankruptcy, thereby preserving your credit score and business reputation. With the assistance of loan experts like darkhorsefinancial.com.au, you can effectively make this debt consolidation loan option work best for your business.
Explore Tax Debt Loans
Have you been struggling to fulfil outstanding tax obligations? Explore tax debt loans. These loans are tailored to assist in settling tax liabilities, including PAYG, GST and Superannuation obligations. Essentially, these financing solutions help businesses avoid ATO notices and penalties and keep tax debts from affecting credit scores.
Working with knowledgeable loan experts is crucial when considering tax debt loans. At darkhorsefinancial.com.au we will help you secure a tailored tax debt loan solution that can offer you fast access to funds with flexible repayment options. Our tax debt loan solutions are available to start-ups, growing businesses, and even those with bad credit. If you consider consolidating tax debts and multiple other debts into one debt consolidation loan, we can assist in making your business debts easier to manage in one repayment plan.
Let Us Help You Pay Off Your Business Debts
If your business debt is becoming unmanageable, you need to nip it in the bud. But we also understand if you find it difficult to take swift actions; after all, figuring out exactly how to pay off your business debt can be overwhelming. This is where we can step in. Get in touch with us, and let’s start discussing financing solutions that can help you manage your business debts better—and pay them off eventually.
