Financial risk is part and parcel of running a business. It is challenging to plan for untenable circumstances like recession, natural disasters or even a pandemic. If your business is in debt, it may be a good time to think of ways to dig yourself out of this scenario.

Business debt is money owed by a business to a third party. Though debt can seem overwhelming, there are certain simple strategies that you can adopt to pay off the debt quickly.

Review your budget

If you don’t have a budget, it’s time to create one. It would be best if you are mindful of all sources of expenses and revenues. In addition, it is good to identify trends, such as expenses that have crept up or revenues that are in decline. If your business has multiple clients or revenue sources, such a categorisation can help you understand which sections of your business are the most profitable. You will also need to ascertain your total debt. A good understanding of your finances can help you evaluate cash flow and calculate what you owe.

Next, you must rewrite your budget. You may need to make minor adjustments or a considerable overhaul. You will need a budgetary line devoted to debt payments. Consider this a new regular monthly expense.

Also read: 6 tips to improve the financial health of your business

Reduce expenses

As you review your budget, you will realise that several expenses can be eliminated or reduced. One way to pay off business debt is to slash any unnecessary spending. Consider categorising expenses in the following ways:

• Essential. This expense is vital, and you must continue to pay for it. Taxes would fall into this category.
• Negotiate. This product or service may be essential but you might be able to find a way to lower the cost by negotiating with the supplier or by finding a better deal. Employee benefits, insurance or even some contractors fall into this category.
• Eradicate. Do away with this expenditure as soon as possible. A variety of expenses can fall into this category—from minimising office expenses to perhaps even letting go of a non-performing employee.

Also consider infrequent expenses, such as annual memberships or technology subscriptions. These may automatically renew if they are not cancelled in advance.

Negotiate with lenders

If the business debt structure is not working for you, contact your lenders to discuss your loan terms. Usually, lenders will be willing to renegotiate the payment period, monthly interest rate, and the total amount of debt that’s owed. You may be able to negotiate a mutually beneficial agreement. For instance, if you make payments on-time, your lenders may lower your interest rates.

Explain your financial situation to the lender. They will most likely want to work with you again in the future if you’re a good borrower. Therefore, you shouldn’t be afraid to discuss your repayment options with them.

Consolidate debt

If your business has multiple debt payments due to various lenders, you may want to consolidate your debt. If you find a high-quality consolidator, you may reduce the total amount that you owe.

If you consolidate your debt, it can have multiple advantages. Having all your debts in one place makes it easier to submit monthly payments. Besides, you may also be able to access more flexible payment options.

Increase in revenue

Another way to quickly pay off your debt is to grow your business and increase sales. Offer new products or services, rally your team together, or try some new marketing tactics. It takes a certain amount of trial and error to know exactly what will resonate with your audience and increase your sales. However, once you know that specific methods work for your business, focus on them as you try to decrease your debt.

As a business owner, having a huge debt can be daunting. Therefore, it is prudent to make paying off debt a top priority.

Also read: How to overcome common payment overdue challenges

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