NERDWALLET: Four Ideas for Small Enterprise House owners to Pay Again Pandemic Debt | Corporations
After navigating the blockades, orders and the COVID-19 log for over a year, small business owners see the light at the end of the tunnel. But the debt many must incur to survive a pandemic still casts an ominous shadow.
In February 2021, the Federal Reserve Bank reported that by 2020, 79% of small employers (up to 499 employees) had unpaid debt. This is an increase from 71% in 2019. Of the companies that applied for a loan, 58% said they cover business expenses such as rent and salary, but in 2019 it was 43%.
Paying back this pandemic debt will help entrepreneurs rebuild their businesses. The tips below will help you pay off your business debts faster while saving high interest on the process.
1. Create a schedule for debt settlement
Chris Woods, founder of LifePoint Financial Group, a financial planning firm in Alexandria, Virginia, says strategic debt management can help pay off debt faster.
“People tend to throw money into (debt). Maybe they’ll pay a little more this month or this month, ”says Woods. Better Approach? Create a detailed repayment plan.
Please fully explain what you are borrowing, including the interest rates and repayment terms on your accumulated business and credit card debt. Watch out for grace periods, deadlines, and actions such as applying for forgiveness when receiving a loan from the paycheck protection program.
Then, set a reasonable (read: achievable) schedule to pay off your debts and start collecting them one by one. Zack Reese, owner and chief operating officer of Colony Ruffers in Atlanta, said if you juggle multiple loans or credit cards, you will focus your additional payments on the debt with the highest interest rate.
“This is your most expensive debt and you can get the greatest cost savings if you pay off this debt the most aggressively,” said Reese, who is also a certified accountant.
2. Find ways to reduce costs and increase sales
“You can’t repay your debts with the money you don’t have,” says Reese.
There are two ways to find more money: reduce your budget or increase your income.
To increase sales growth, rethink your business model and look for ways to reach more customers or expand your sales presence. You can also take steps to speed up your cash flow. Renegotiate the contract and incentivize customers who can ask for prepayment or pay 6 or 12 months in advance.
To cut costs, check your budget. Check out ads, subscriptions, professional memberships, and even office space. What can I cancel, pause or shrink?
Ken Alogy, Managing Director of Greenwood Capital Advisors, Washington, DC said:
3. Consider refinancing and integration
Make your debt cheaper by refinancing. Depending on your credit and business history, you may have access to better interest rates, lower monthly payments, or more favorable repayment terms. The same goes for any business credit card debt you take on, Woods says.
“Look for a way to transfer this debt to another card or lender to avoid interest,” says Woods. “Everyone has to find out, especially if they pay on time.”
Do you want to juggle multiple loans? Integrate them into a single small loan. If possible, pay monthly at low interest rates. Added bonus: a lender has a payment.
4. Use free business resources
Running a business can consume anything. It is also possible to manage business debt. Do you do both at the same time? Something could be there.
“Many (small businesses) are in survival mode forgetting that they are in control of their business, interacting with their customers, and looking for opportunities to grow,” says Alozie.
Connect with your local SME development center or Community Development Corporation. You can also network with mentors through SCORE, a volunteer organization that offers free mentoring for companies.
These organizations monitor development status, including PPP loans and many rule changes, and send out emails with tips, important deadlines, and updates so you can focus on your business.
“Don’t think you have to do it yourself. SCORE Certified Business Mentor Alozie said, “You have more influence so run your business from a pandemic. They’re not trying to keep yourself updated while you’re trying. “
Source link NERDWALLET: 4 tips for small business owners to repay pandemic debts | Companies