Although understanding how to manage debt is important for all business leaders regardless of the size and success rates of their company, it’s especially important for startups and new small businesses to have a good grasp on this topic. According to an article from All Business, a few of the top reasons why small businesses fail include failing to properly tackle finances and overspending before they have a positive cash flow. Similarly, the U.S Small Business Administration also suggests that poor credit management makes a small business more likely to fail.
1. Get organized: The first step to managing your business debt is to be organized, so start by making a list of all of your daily, weekly, monthly, even yearly expenses – both fixed and variable expenses should be included. Within this list you should also make a note of any interest rates applied to each so that you have a true understanding of how much you owe.
2. Negotiate: To protect your cash flow, speak with your creditors and lenders about your payment terms – one strategy is to agree on a plan where you make the lowest possible payments each month. This way, you can keep more in your pocket and maintain a higher cash flow rather than fall into a red zone.
3. Prioritize payments: After you itemize each of your expenses and know how much you can afford to pay each month, prioritize them by order of interest rates, with the highest interest rates at the top of the list. Since higher interest rates will lead to overall higher costs, you’ll want to pay off this type of debt first to reduce how much you accrue in additional charges.
In addition to the above, working with the team here at RMP Capital is an excellent way to help manage your business debt. That’s because we offer creative funding services that allow you to continue to run and grow your business – we’ll take care of speeding up your cash flow to ease some of your stress.