Small business financing can be a tricky thing.
On one hand, there are tons of options available, from government loans (sometimes) to secured loans, lines of credit, merchant cash advances, unsecured loans, credit cards, and many others.
All have one thing in common: they are debt financing. And debt carries a cost.
Two years ago, the cost was low. Now, as we all know, debt financing is becoming more expensive (due to rising interest rates across the globe).
…so what can a small business with debt – or about to take on debt do about this?
- Acknowledge that while debt is a growth enabler, it is also an expense. Manage the expense the same way you’d manage any other expense like (say) office supplies – that is to say: budget for it. The moment that it gets too expensive, cut it (just as you would office supplies).
- Start by developing a process to manage debt: lay out your debts on a spreadsheet, along with amounts, interest rates, and due dates. Prioritize cutting the highest interest items with the furthest-out due dates first, as these will be the debts that will sink your business.
- Get a business plan together. Identify your strengths and opportunities, and look for ways to increase sales with little or no effort (eg: add-ons at close, marketing automation, expanded virtual inventory line, more effective social campaigns, etc.)
- Focus on driving sales, and accelerate debt paydown with the incremental profit realized.
- Focus on cutting costs elsewhere in the business – every penny counts – optimize everything, and move savings toward debt pay-down.
- Take a look at your credit rating: run down any discrepancies, assuring that you have the highest possible credit rating.
- Talk to your banker – (we can help) – take in your revised sales plans and your optimized expense management routine, and look into a loan to consolidate the high interest debt that you’re carrying, and present an accelerated payback/cashflow projection
If you can’t get a loan – and you need one – we can help.
You don’t have to go it alone.