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Whether
it’s personal or business debt, the very word can inspire a sense of doom
and hopelessness. But there are several strategies for small businesses with
large debts or financial struggles.
One
of the first steps a business can take is to find and connect with a
reputable consumer credit counseling center. These organizations offer
education, advice and credit management strategies. Some also offer debt
consolidation and repayment programs. However, it is critical that you read
all of the fine print and do a thorough background check on any organization
that claims to help you with your finances. Don’t be afraid to ask for
references, check with a better business bureau or look into any legal
records to see if the organization is less than trustworthy. The most
reputable organizations require an education component to any service they
offer so that you or your business avoids falling into debt again in the
future.
Another
strategy for managing your debt is to step up the collections process.
Consider running credit checks on potential customers or offering profitable
clients a discount for early or prompt payments. Also determine whether you
need to hire an outside agency to collect on some of your most delinquent
accounts. These agencies usually take a percentage of the accounts that they
receive payment on.
Be
careful when considering whether to sell unneeded assets. While excess
property can be converted to cash, finding a buyer for specialized equipment
can be difficult and it may be sold at a loss.
Likewise,
you need to carefully consider any loan consolidation program. If you have
few creditors or stand to benefit from much lower interest rates, it can be
a good idea. However, consolidating numerous or widespread debts can be
unattractive to potential lenders, and the process might reveal that a
business has overextended itself.
Liquidation
and bankruptcy should be seen as the absolute last choice. For small
businesses especially, bankruptcy can be the ultimate death of a struggling
business. While you may still be allowed to operate under court supervision,
the process is expensive and time-consuming.
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