If you’re a small business owner and you’re worried about your debt, you can take some consolation in the fact you are not alone. One-in-four small and medium-sized businesses in the UK suffered from bad debt over the past 12 months, according to Bibby Financial Services’ (BFS) latest SME (small and medium-sized enterprises) Confidence Tracker - that’s as many as 1.3 million firms who could be affected by insolvency or struggling to pay their customers.
Handling debt is a challenge for all businesses - big, small or somewhere in between. To that end, I’ve put together five tips for ways your business can dig itself out of debt:
- Cut costs
- Unused business space you’re paying rent on.
- An annual company holiday.
- Expensive unused equipment.
- A weekly fruit-and-veg delivery.
- Outsourced accountancy services.
- Company smartphones.
Speak to your suppliers too. Would they be happy to agree to some discounts and deferred payments?
- Keep a keen eye on your cashflow
You can keep cashflow healthy by:
- Invoicing for payment early.
- Chasing for payment with regular reminders.
- Start legal proceedings.
- Employ a debt collection agency.
- Speak to your solicitor.
- Find out what support is available to you
The government runs a number of support schemes for businesses, including:
- Finance and loans.
- Business support in the form of mentoring and consultancy.
- Funding for small and medium-sized businesses and start-ups.
- See if you can lower your business credit card rate
While business credit cards offer many benefits, including interest-free purchases and travel insurance for business trips - struggling to make the payments could leave you with mounting debt.
One way to improve this situation is to speak to your bank, explain your situation and see if they will reduce your interest rate or give you a short repayment holiday. If they’re a pro-business bank and you’re a longstanding customer with a good credit score, they should at least listen to your case.
- Consolidate your loans & consider IVA or trust deed
This will not only streamline things for you and make it much easier to manage your loans, it’ll also help bring your debt down.
If you have heavy unsecured personal guaranteed debt, other options include an IVA in England or a protected trust deed in Scotland.
As you’ll know, running a business isn’t easy. And, for many small companies, debt and financial problems are a normal part of a company’s development, especially in the startup phase. But if you do find your debt running away from you, consider some of the above tips - they might put you back on the right path.
By Clare Greechan, Trust Deed Scotland