Are you having trouble sleeping at night because your company owes money? You’re not the only one experiencing this. The government debt consolidation loan This is an extremely practical solution to your debt in Small Businesses management programs. It’s also one of the most difficult problems that small business owners may face.
Many failing companies have filed bankruptcy when things get very difficult and there is no way out. However, new regulations have made it more difficult to declare bankruptcy in order to get rid of debt mountains. Because bankruptcy comes with a steep price tag, it is not an easy path to choose. Filing for bankruptcy can cost you thousands of dollars including attorney and court fees. Even worse, bankruptcy can cause damage to your credit rating and reputation as well as that of your company, making it almost impossible for you to restore commercial stability.
There are ways to avoid such financial disasters. These are some tips that will help you get control of your debt so it doesn’t control you.
1. Before you apply for a loan, do your research.
Before applying for a loan, you should calculate your debt coverage ratio. This will impact how easy it is to repay the loan. Lenders use the debt coverage ratio to determine the loan amount, interest rate and terms.
The simplest way to calculate your debt coverage ratio is to divide your net operating income by the total interest and principal payments. Commercial banks consider a 1.15 ratio to be ideal. It’s time for you to think about ways to increase your cash flow if your ratio is less than 1.
Although your initial instinct may be to convince banks to lend you large amounts of money, it is important to tread carefully. If your debt coverage ratio suggests that the loan you are looking for is too large, you will have trouble making payments.
2. To reduce debt, increase cash flow.
It is not desirable to be in debt. Businesses should prioritize debt repayment. These are some ways to increase your cash flow and pay down your debt faster.
- Increase productivity. Both improving your company’s efficiency and generating new revenue streams are viable options to increase cash flow. It is worth investing in productivity and revenue enhancement by training employees or deploying new technology. Implementing new marketing strategies can help you make more money. While this may increase your short-term expenses, a well-thought out marketing strategy can help increase revenue, which can be used to repay debt.
- Renegotiating terms with vendors:An effective account payable management strategy can increase cash flow and decrease debt quicker. Many sellers will allow you to pay once your goods or services are delivered. This could be after 15, 30, 45 or 60 days. You might also be able negotiate a two to ten percentage-point reduction in your early payment. Look for suppliers that can offer you consistent better pricing. These are all great ways to increase your income.
- Optimization of inventory turnover:Stagnant and inaccessible inventory can reduce cash reserves. It is important to manage inventory on a regular basis. Make sure you make “just-in time” purchases that match the projected demand . Work with vendors that offer consignment inventory and return rights.
3. For a lower interest rate, contact your credit card company.
The average annual percentage rates (APRs) for credit cards in America has fallen to 14.95 percent. Although interest rates are at an all-time low, many people consider the cost of a loan of nearly 15% excessive. It is, to be honest! Pay off your credit card balance every 30 days to avoid interest charges
Unfortunately, many companies are drowning under the weight of credit card debt. High-interest debt should be eliminated. This can be difficult for some businesses.. Balance transfers are a way to consolidate credit card debt and get a single card at a lower interest rate.
The best way to obtain a credit card with a lower interest rate is to request one. You can request a lower interest rate if you have excellent credit and are a loyal customer who has paid on time. You could save hundreds of dollars each year if you can lower your interest rate by just one or two percentage points.
4. You must ensure that your debt does not become a liability.
Credit card, mortgage, auto loan and line of credit interest rate are expected to rise between 1.25 and 1.50 percent by 2015. Businesses with large debts and variable loans will be most affected by rising interest rates. While interest rates are at their lowest point, it’s a smart idea to lock down a fixed rate loan as soon as possible. Fixed rate interest loan are those where the lender guarantees to maintain a certain rate for a specified period of time. Even if interest rates rise, you will still be paying the lower rate. First, determine whether you have variable or fixed rate loans.
5. Get your debts consolidated.
Consolidating debt is a great way to lower interest rates and accelerate debt repayment. Instead of paying multiple loans at different interest rates, you can combine several loans into one low-interest loan.
Let’s say you have two loans. One has a $10,000 balance with a 13% annual rate and the other has a $20,000 balance with a 12% annual rate.
Your monthly payment currently stands at $1200. Let’s say your interest rate drops to 9.2 percent because of debt consolidation. A $750 monthly fee would be required. You will therefore save $450 each month. Talk to a financial professional to determine if consolidation of debt is right for you.
Your personal and business financial health will be affected by the actions you take now. Before you commit to a solution, make sure you have considered all your financial options.
The best advice for government debt consolidation loans is to remember what your parents taught you as children: Don’t spend more money than you earn.