How does one pay off business debt quickly?

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

Business debt by definition 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’s a good practice to be mindful of all sources of expenses and revenues. In addition, it is necessary to identify trends, 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 verticals 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.

The follow-up action is to rewrite your budget. You may need to make minor adjustments or even a considerable overhaul. You will also need a budgetary line devoted to debt payments. Consider this a new regular monthly expense.

Reduce expenses

As you review your budget, you will identify the expenses that 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
• Negotiable - 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
• Eradicable - Do away with this expenditure as soon as possible. A variety of expenses can fall into this category—from minimizing 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 the 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 rates 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 your 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 be able to reduce the total amount that you owe.

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

Increase your revenue

Another way to quickly pay off your debt is by growing your business and increasing 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 what 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 imperative to make paying off debt a top priority.