The debt situation in the U.S is worrying if data from the authorities is anything to go by. Statistics from the Federal Reserve show consumer debt stands at $2.5 trillion or an average percentage of 7,800 per person. The U.S Small Business Administration (SBA) says much of the unsecured debt has been used in business operations.
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If you are running a business today, it is most likely that you have borrowed at one point or the other. The problem comes when you are stuck in a debt rut forcing you to bankruptcy or total collapse of your treasured venture.
With SBA reporting over 65% of enterprises are struggling with debt, how do you maintain a healthy debt sheet? Here are some ideas.
- Evaluate Your Budget
This might sound like an obvious step but you will be surprised by the number of business people who operate on reflex. A study by Business Insider shows over 60% of business owners made a decision based on pending debt deadlines and not a concrete budget.
You have to track where your money is going and where you are getting it from. Every single coin should be accounted for and when you are sure the overall future strategy needs more funding, then you can explore borrowing.
- Evaluate Your Priorities
When you are starting as an entrepreneur, it is easier to save and stick to a future plan. However, when money starts flowing in, all these plans are discarded and you find yourself making more unplanned purchases and jumping at every borrowing opportunity to enlarge.
You need to list down your priorities and discard the rest. It is a tough call, but it has to be done lest you lose your business a few years down the line. As they say, nothing comes easy more so in entrepreneurship.
- Look at the Structure of Your Debt
This is a tough call as it will involve calling your lenders and trying to restructure your debt. This process has to start with a careful check of any imbalance between short-term and long-term debt.
If there are benefits to restructuring, debt negotiations, consolidation or any other course of action, you need to take the necessary steps to initiate the process. Remember you have invested a lot in your business and there is no reason to allow spiraling debt to choke it.
- Seek Professional Help
Lululemon founder Chip Wilson told Business Insider in an interview that one virtue of a successful entrepreneur is admitting they need help. It is time to utilize this gem of wisdom by incorporating the advice of a debt consultant if you realize things are going down. These experts will help you form a plan and if you stick to it, you will be out of danger in no time.
- Avoid Credit Card Debt
It is true your credit card offers a lot of convenience but you need to realize the harm it does to your credit score and your overall debt situation. These plastics will tempt you to buy things you really don’t need leaving you in a more dire situation.
Debt is bad for any business, but in the modern economic environment, it is a necessary evil. The way you control it will determine your success or failure so start looking at your books right now.
Bill Manny is a financial expert, writer, and mentor with decades of experience in the industry. He currently consults for debt review programs and advises consumers through writing.