Staying afloat can sometimes be difficult for businesses grappling with constantly-changing markets and consumers demanding the latest products and services. It’s easy for your business to fall behind on payments, and from there, hitting a crisis point becomes increasingly likely.
Debt management can be a sure way to get your business back on track. Here are some tips to help your organization bounce back from a debt problem.
Hire a Debt Management Professional
Debt management professionals have the skills and tools to guide you through the necessary steps to regain control of your debt. They can provide you with accurate information to navigate a sometimes-confusing situation. They can even assist with matters such as drafting budgets and letters to creditors. There are for-profit companies and non-profit debt management agencies, so you can choose the option that works best for your organization.
Review Budgets and Make Necessary Cuts
One of your first goals will be to free up money. Review your company’s budget, taking a hard look at your expenses and spending habits to determine where you can reduce costs. Whether it’s cutting spending on marketing or payroll, getting rid of expensive lunch meetings, or selling unused equipment, every little bit helps. The money freed up can now go toward debt repayment. Even after the debt is cleared, it’s good business practice to maintain a budget and review it periodically; it will give you a better idea of where the money is coming from and where it’s going.
One of the biggest mistakes that debtors make is ignoring their debts when they can’t make payments on time. A better option is to contact your creditors to arrange a repayment plan. Have all your financial information handy when you’re speaking to (or writing to) creditors.
Send an email or even a letter if you find that less stressful than making a phone call. You can state in that you prefer to communicate exclusively in writing. That way you’ll also have a paper trail showing all your correspondence with creditors. In the case of a letter, write it on your company letterhead and set out an honest portrayal of your finances and current situation, including your reasons for not making payments on time. Set out your proposed payment plan (for example, you may ask for reduced minimum payments to eliminate the current debt) and explain exactly how you plan to pay in future; that’s the most crucial part. Attach all relevant documentation, such as your budget, revenue and expense information, and any other documents that explain your situation. And make sure to reply immediately to any responses.
Talking to Creditors
Sending an email or letter or calling creditors can be daunting. When you contact them, it’s important to have all your financial statements, including your budget plan. One of the best options is not to ignore your debt, but to discuss a reasonable, amicable, and affordable repayment plan with your creditors.
In Canada, each province may have a statute of limitation on debt collection. Most creditors will have contact information on their website or it can be found on a recent statement.
Consolidate Your Debt
Consolidating debt is a common practice in debt management. You have two options: you can take out a business loan to repay all your creditors or you can talk to your financial institution about taking out a debt consolidation loan.
Depending on your current financial situation, it may be difficult for you to get approval for a business loan, so applying for a debt consolidation loan is likely your best bet. Having only one loan to pay means that most of your monthly payment will go toward the principal of that loan, enabling you to pay off your debt faster. A secured loan requires that you put up collateral; an unsecured loan does not. Debt management professionals and financial advisors understand how to negotiate with creditors and can recommend the best options for your debt consolidation loan.
If your business is facing a debt management crisis, know that it is possible to get back on the right course. Even large companies have required debt management assistance at some point. Most companies bounce back because they’ve implemented and followed a debt management plan. And so can yours.
Jennifer D’Agostino | Contributing Writer