According to the statistics from July 2013, over 88 percent of small businesses carried a debt, while the average size of this debt was around $835,828. The reason behind this is the fact that getting indebted is a slippery slope. At first, a single hole appears and you borrow just a bit in order to fix it. Unfortunately, as soon as you fix it, another one emerges someplace else and you are forced to repeat the process. Luckily, there are a few ways to dig yourself out of it, and here are just some of them.
1. Find an extra source of revenue
The reason why you got in debt in the first place was because the income of your business wasn’t high enough to cover all of its expenses. One of the ways to fix this problem is to find an additional source of revenue. You could outsource some of your skills, rent out a property that you own, invest in real-estate or even sell some of the extra supplies or equipment your business is currently not using.
2. Austerity, austerity, austerity
Although it is considered bad practice to just outright start saving money on every single aspect of your business, you could definitely benefit from a bit of austerity. One of the things you could do is relocate to a smaller office and have a part of your employees telecommute. Additionally, in a situation where you face an increased workload, you could just hire freelancers on a performance pay. This way, if it turns out that this was just a fluke, you don’t have to lay people off or (once more) sell the unnecessary equipment. Flexibility is the key to leading a truly frugal business.
3. Try to consolidate
One of the problems with dealing with multiple debts lies in a fact that you have hard time prioritizing or even wrapping your head around them. The best course of action in this situation would be to try and consolidate your debts. Not only will this provide you with a single debt to focus on, but also reduce your interest rates by quite a bit, which means that you will have to pay much less in the long run. Companies such as NSW Mortgage Corp offer a chance to do all of this online and thus avoid the incredibly long and complicated bureaucratic process that would otherwise be required.
4. Proclaiming bankruptcy
If all else fails, you can always proclaim bankruptcy and start over. While a lot of people have in mind the traditional bankruptcy, there is an alternative that may be more to your liking. We are talking about the so called Chapter 13 bankruptcy, which enables business owners to pay off all their debts and maintain the control of their property at the same time. A business will be presented with a repayment schedule and will be forced to pay a portion of their entire income for next three to five years. Still, in order to be eligible for a Chapter 13 bankruptcy your debts cannot be larger than $1,149,525 which, as you can see, is well over the average small business debt we mentioned in the introduction.
The options you have before you are quite numerous, but simply making a decision is not enough. The hard part is actually putting these resolutions in practice, which might require a lot of determination. Sure, sometimes, it is much better to just give it all up and start over, but then again, in this situation you would never be able to test your mettle.