By Steve Piorro

If you are part of the 20% of small businesses on the brink of failing in their first year, 30% of those failing in the second year, 50% of those that fail within 5 years, or even part of the 305 that fails at the 10 year mark, the following tips may help you overcome the challenges faced by entrepreneurs.  A percentage of uncertainty is always lurking when you open a business. After analyzing the data from hundreds of surveys conducted by entrepreneurs, the most useful tools and best practices surfaced to the top. We have included a curated list of these to help you meet the challenges that come with the territory of entrepreneurship.  Don’t fall prey to scammers offering to settle your debt for pennies on the dollar. Desperate financial situations call for equanimity in thought and action. There are legitimate ways of reducing your financial stress. Starting out, analyzing your debt is the first step in the thousand mile journey. Take it and find the options best suited for your circumstances. Evaluate the options and find top deals you didn’t think were possible.

Boost Your Cash Flow

Last year, in 2017, there were 28.8 million small business in the US, they account for 97% of all businesses in the country.  Most small business owners know that cash flow is king. The five-step cash flow goal is to:

  1. Spend less – Negotiate all rates quarterly. Review overhead costs. Save energy; purchase energy-efficient equipment and use it only as needed.  Use the Rs of green being: Reduce, Reuse, and Recycle all office supplies, containers, copy paper, cleaning supplies, etc. It pays to be frugal.
  2. Increase sales – Align prices with target profit margin. Apply surcharges if a price increase is not competitive.  Earn interest with your cash on hand; open a high-interest saving or a money-market account. Credit cards with cash-back features allow small businesses to earn 1-6% money back on specific products and services
  3. Payout more slowly – Use your business credit card to pay suppliers and make purchases; take advantage of the 20-30 day grace period. Tie sales commission to the payment receipt for each sale. Open up a line of credit with the supplier.
  4. Get paid faster – Send out invoices right away.  Shorten your payment terms. Accept all forms of payment or as many as possible.  Follow up on overdue invoices. Offer subscriptions that give customers the option of paying for a full year’s service.   
  5. Avoid stacking up – Purchase order financing is a favorite way of getting loans or advances to cover the cost of operations.  While a fast fix solution, too many loans, and increases will accumulate interest if not managed promptly. Accepting multiple advances or loans to fund your daily operations is called stacking.

Debt Relief Options for Small Businesses Crash Course

While cash flow increases, here are some pros and cons to weight when it comes to choosing the right debt relief options in stock.  

To begin with, don’t confuse debt consolidation and debt relief.  They’re two different processes. Debt settlement occurs when you can pay down your debt for a lump sum of money that you negotiate with the lender which is usually substantially lower than the balance. It sounds like a wonderful solution to get rid of debt, but there are too many cons.  For example, the infamous fees, and there are no guarantees. Many reputable lenders may not work with debt Consolidation companies or agree to negotiate your loan with you for a fraction of the balance unless you are considerably behind in payments. By the time they agree to settle, you will probably have lost your creditworthiness and also your business solvency.  Not to mention, your forgiven debt is taxable income to the IRS.

Identify Scammers

Debt settlement scammers prey on small business owners burdened with financial troubles by offering them deals that nobody can refuse, as their sales pitch usually points out,  yet are too good to be true. Sometimes, entrepreneurs sign up before realizing their mistake and end up in lawsuits, with even more debt, and their credit trashed. These fraudulent companies never negotiate the debt and are becoming such a national problem that the FTC has created a set of rules intended to raise the standards of business practices.

As a rule of thumb, beware of the following red flags when dealing with a debt settlement company. If a company asks for fees up front, says it can settle for 70% percent of the loan, guarantees it will make your debt go away, says it can stop collectors, or requires a third party bank, stay away from them. Only do business with legitimate companies.

Legitimate Alternatives for Small Businesses Debt Relief

Let’s face it, debt doesn’t go away unless you pay it down and if you can’t, penalties, late fees, and interest will accumulate and ruin your profits and your creditworthiness. After lowering the cost of doing business as much as possible, improving your cash flow, increasing sales, and watching out for scammers, the next step in getting your business out of debt is to work systematically towards that end.

  • Make a list of your loans: prioritize your loans by interest rate, amount of the loan, and the number of payments you’re behind. Once you have organized your list, it’s time to seek out your team of debt relief helpers.
  • Call your lender first.  Deal directly with the lender.  Ask for reconsideration, be honest and straightforward.  Negotiate terms of the loan, ask about hardship programs or a special arrangement to help you catch up. They’re just as interested as you in helping you meet your obligation.  
  • Consolidate your loans into one.  Your original unpaid loans will be paid off, and you will end up with one, hopefully, lower payment.  However, your debt will most likely be prolonged. There are various types of consolidation loans.
  1. No Collateral Loans limit your risks but increase the lenders so your interest rate and monthly payment may reflect that.
  2. Standard Loans use business or personal assets as collateral. This type of loan offers a lower interest rate option.
  3. Non-Profit debt consolidation loans typically fall in the lower category of loans under $50,000.

Consider Bankruptcy

Another option to get rid of debt once and for all is to file bankruptcy.  There are two types of bankruptcy options available. Chapter 11 and Chapter 13 are both known to be restructuring methods that allow small business owners to renegotiate their credit card terms and other unsecured loans.  Both of these Bankruptcy Law chapters help avoid the filing of Chapter 7 which is the worst-case scenario for your financial health.

Debt Management

Now that you know the basics and understand that you have options to choose from and advice on what to steer away from, when selecting the best debt relief option for you, make a plan and stick to it rain or shine,  you’ll see the rewards in due time. Business owners who have stayed in business longer and have been more successful have revealed their secret to success is being flexible and patient in managing their business debt affairs.

Steve Piorro writes on behalf of Consumer credit card relief and writes an article on credit card debt, debt consolidation, debt settlement, bankruptcy etc. Steve has been helping people to manage their finances in an easy and intelligent manner. @CCRL20161

Debt stock photo by Yingzaa_ST/Shutterstock