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Published On: Tue, Jun 26th, 2018

How to Deal With Stress If Your Start Up Faces Debt

Are you running a start-up and you have debts? Do not worry, you are not the only entrepreneur who faces this issue. If you want to find a solution to get yourself out of this situation then you need great determination in order to make bold decisions. They are the best weapons in this case, because they will help you find the right strategies to reduce the debt of your business. You should focus on growing your business and doing what you love, because there are multiple ways to manage your current situation. Because you are running a start-up you are aware that your company’s reputation is critical because you have to compete with businesses that have experience in this domain and who established a name for themselves. The truth is that you have small chances to compete with a multinational company, especially if you have debts, so make sure that it is a priority for you to pay your debt.   

photo/ Mary Pahlke

Understand the extent of your debt

If your business faces debt then you have to understand what the causes that lead to it are. When you understand why you have debt you are able to make a plan to reduce it. You should not ignore your present situation, because your debt will still be there and affect your business. And there are great chances for it to grow if you do not implement some measures to reduce it. There are times when a business does not actually face debt, but the manager does not know how to organise their income, and all you have to do is to get in touch with a professional to help you make a financial plan.

The first thing you have to do is to identify the extent of your debt, and then organise your budget in such a way to save some money you can allocate to paying what you owe. It is important to check if there is any way to reallocate money towards your debts.

Tips:

  • Decide a certain percentage of your income that you will be directed to pay your debts
  • Establish a sum you will pay monthly in order to reduce your debts
  • Decide what austerities you will implement until you pay off your debt

Try to find new founds for your business

In case you do not consider a viable option to use a part of your income to pay the debt, then a great strategy is to try to find new funds that can sustain your business. Considering that you are an entrepreneur, one way to earn more money is to have a second job. The money you earn from your second job should go directly to paying your debts. Also, you can try to find a partner who considers your start-up to have potential to become a great business.

Find a way to re-organise your debt

When you will have a clear image of your debt, you should consider talking with a specialist to help you restructure it in a way that offers you the possibility to reduce it.

  • In case you are not an expert in finances, you will have to ask a professional to check the terms of your loans, because in this way you will find a solution on how to pay your debts faster.
  • Another option is to contact your lenders and see if you can negotiate the terms of your debts. The majority of lenders are willing to revise the terms of their loans because they are aware that if they will hire a collection company they will lose a part of the income.
  • Another great solution is to have an IVA. In case you do not know the IVA meaning then you should know that it is a solution that offers you the possibility to bring all your debts together and to have a monthly payment that you afford. There will be established a plan and according to it you will have to pay a certain sum monthly for 5 years. When this period ends the remaining debt balances will be written off.
  • Another great strategy to reduce your debts is to automate your payments. This means that you will pay your debt the moment you will receive income in your bank account, and you will not have to wait until the end of the month to save the sum you owe. People always spend more money than they can afford, but if you will not have that sum in your account, you will definitely find a way to save.
  • The majority of entrepreneurs do not have experience with saving money and managing their finances, and they prefer to hire a company specialised in debt restructuring to help them make a plan to pay their credits. The company will check your financial status and will negotiate with the lenders on your behalf.

Author: Cynthia Madison

About the Author

- Outside contributors to the Dispatch are always welcome to offer their unique voices, contradictory opinions or presentation of information not included on the site.

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