Debt is a reality of many business situations, whether it’s from start-up costs, investments in growth or the ebbs and flows of market demand. But when debt becomes unmanageable, it can halt growth and even threaten the survival of a company. This article offers practical guidance for directors on how to manage company debt and make informed decisions to keep a business financially healthy.
The first step in tackling unmanageable company debt help is to reexamine your budget, particularly the things you really need versus those that are optional. In this way, you can uncover ways to cut your expenses and free up funds that could be put toward paying down your debts. For example, consider cutting back on business decorations or renegotiating your office rent or subscription fees. You could also reorganize your current debt agreements and try to find ways to adjust the terms of repayment, such as by consolidating into one payment or lowering the interest rate.
Next, it’s important to communicate with your creditors and let them know that you’re having trouble. This will help you negotiate a better solution. You can approach them individually or through a professional debt counseling service. Professional debt negotiators have the experience and skills to help you get a more favourable arrangement that could reduce your monthly payments, lower your interest rates or eliminate some of your debt altogether.
You can also take steps to increase your revenue. This can be done by building a loyalty program, starting social media marketing campaigns or raising prices. You can also improve your customer-facing processes and offer customers markdowns or deferred payments to give them a chance to pay you sooner.
Another option is to rework your debt structure by offering your lenders equity in the company in exchange for reduced or even eliminated debt. This is called a company voluntary arrangement (CVA) and should be approached with the help of a licensed insolvency practitioner to avoid legal issues.
A professional financial advisor or accountant can conduct a thorough analysis of your company’s financial health and come up with a long-term plan to address your debt situation. They can also provide valuable insight into your business’s unique circumstances and develop a solution that fits your particular needs. They can also offer a more objective perspective when it comes to making financial decisions, helping you to separate your emotions from the decision-making process. This is especially helpful when deciding on the right course of action in the face of unsupportable debt.