2020 has been a challenging year for all of us. As the COVID-19 pandemic has wreaked havoc worldwide, small businesses have not been spared.
If your small business is struggling with debt, you’re certainly not alone. There are still options to get out of small business debt, even amidst the chaos that is 2020.
Assess Your Budget
Similar to getting out of personal debt, the first step to getting out of small business debt is looking at your budget. Your budget has likely changed over this year. And chances are it’s going to continue to change for the foreseeable future. As a result, you may consider reviewing your budget monthly – or perhaps even more frequently.
Budgeting doesn’t have to be complicated. It’s merely comparing how much money is coming in with how much money is going out. Take a look through your business’s bank account statements and invoices from the past few months to get a more concrete idea of the numbers. It’s crucial, also, to understand the difference between fixed and variable costs when examining your budget.
- Fixed costs are the expenses that stay the same month-to-month.
- Variable costs are one-off expenses or costs that change based on several factors. If you’re overwhelmed by the numbers, consider using a budgeting app.
Look to Cut Costs
Once you’ve examined your budget, you may need to make adjustments to help your business get out of debt. Ask yourself if there are expenses that aren’t serving you right now. Your business strategy may have shifted or changed completely, which could mean there are some things you had been paying for that may not be relevant anymore. Find as many examples of those as you can – even if it’s only a temporary cut.
You may also consider selling equipment or tools you no longer need. If possible, consider downsizing your offices or using a co-working space. Many companies are continuing to have employees work at home as much as possible to lower operating costs. Additionally, consider whether you can share resources with other companies with similar needs. Unfortunately, many companies have had to cut salaries or lay off employees. While this of course can cut costs and is sometimes a necessary measure, consider other ways to reduce expenses first.
Increase Your Income
The year 2020 has changed the way our world looks. As a result, it’s likely changed the way your business looks too. The key to making money in 2020 is to adapt to the needs and challenges of the moment.
Adjusting or adding to your business strategy can help bring in more income.
- Get creative: If what your business typically provides has become less relevant in the previous months, think outside the box. Consider what you can offer within your industry that will improve your customers’ lives in the current climate. Now is not the time to resist change.
- Embrace going virtual: So much of what we do has moved online this year. Consider how you can offer your goods or services online. Many companies have provided webinars or hosted digital events that have been great for business. Others sold gift cards online to keep sales coming in when businesses were closed or slow.
- Harness the power of social media: Social media is an incredibly powerful tool in today’s day and age. And best of all, it’s free! Promoting any new offerings (or simply reminding followers you exist) can help boost business. And if you have some funds to spare, paid advertising on social media can expand your reach.
- Consider crowdfunding: Many small businesses are turning to their communities in these challenging times. Setting up a GoFundMe or similar crowdfunding campaign can help your customers and community help you bring in money and stay afloat.
- Understand your resources: Many local and state governments are offering assistance to small businesses that are struggling. Additionally, creditors and lenders may also be offering relief programs to their customers. These options can help your business find more funding, but be sure to understand the long-term impacts of these programs.
Bringing in more money can help you put more towards paying down your business debt. It will also be beneficial for the long-term health of your business.
Make a Plan
The year 2020 has proven that planning for the future can be more unpredictable than many of us realized or cared to admit. However, uncertainty doesn’t mean you should abandon planning altogether. Having a concrete plan is one of the most critical steps in paying off business debt.
- Set a goal: Once you’ve examined your budget and your business strategy, consider placing a timeline for paying down your debt. Of course, you want to get out of debt as quickly as possible, but make it a reasonable target based on the concrete information you have. The uncertainty of our world could mean that goal has to change down the road – but that’s okay. Simply having a goal will train your sights on getting out of debt and keep you moving forward.
- Hold yourself accountable: Once your goal is set, consider how you’ll stick to it. Maybe it’s reminders on your phone. Perhaps it’s writing due dates in red pen on a desk calendar. Or possibly it’s a visual representation of how much progress you’ve made in paying off your debt. Find what works for you to keep yourself on track.
- Celebrate milestones: Enjoying the moments when you hit a significant milestone in paying off your business debt can help keep you motivated. Of course, avoid jeopardizing your progress by rewarding yourself too extravagantly. But you deserve a small celebration, and it will keep you working towards the next milestone.
Avoid the Quick Fix
Some business owners panic when trying to get rid of their business debt. They look for a quick fix. Merchant cash advances are a common way that business owners try to bail themselves out. These are not technically “loans.” The cash advance company gives the business money in exchange for a portion of their daily, weekly, or monthly sales. Merchant cash advances typically result in incredibly high APRs – often verging into the triple digits – and can trap businesses in a debt cycle.
If you’re not sure how to go it alone, that’s okay! Paying off business debt can be an incredibly overwhelming process, particularly in 2020. A debt professional can help you find the path out of debt that’s right for you and your business.
The team at Tayne Law Group, P.C. is here for you. We know the challenges of getting out of small business debt. And we’ve helped businesses through it. We tailor our solutions to your specific situation. Call us for a free consultation at 866-890-7337 or fill out our short contact form and we’ll get in touch!