Common causes of business debt
There are many reasons you can fall into financial distress as a business owner. The companies you’re in debt to will continuously demand payment, regardless of your cash flow issues.
If you run your own business, you expect to be paid promptly for any work or service you provide. But unpaid invoices can have a massive impact on your business cash flow and cause major delays in your debt repayments because you simply don’t have the funds to cover them.
Business debt can also happen if your business relies on advance orders or bookings, as this will seriously impact the amount of revenue you can expect to have coming in. This will not only make it difficult for you to deal with your debts but can affect your business as a whole due to needing funds to keep it functioning.
Life is unpredictable, so there are bound to be emergencies that will present you with unexpected business costs. These often put a spanner in the works when it comes to your cash flow and can leave your finances stretched and your stress levels high.
Much like life, the market is also unpredictable and everchanging. Changes to market conditions can result in business being tough and your revenue being lower, leaving you struggling to make ends meet unless it picks up.
How to stay on top of business debt
If your business falls into debt, there’s a high risk of being declared bankrupt, even if you do have the potential to trade successfully. You may be able to reduce the chances of this happening by taking some of the following steps:
- Speak to the people you owe money to
Ask any creditors about spreading out your repayments or ways to work around your cash flow issues in order to help you until you can get back on your feet. If you keep them up to date with your situation, they’ll be more willing to work with you.
- Sell non-essential company assets
Selling assets that you don’t necessarily need can be a great way to drum up some much-needed money when times are tight. It can also be a great way to save you some cash if you’re able to sell something that is generally expensive to run, whether it’s a vehicle, machinery or something else that’s no longer needed.
- Reduce your overheads
Simple measures like downsizing or relocating your office can be a great way to free up funds to ensure that you always have money available to cover your debt repayments.
- Cancel non-essential business subscriptions
When you’re struggling with business debts, it’s important to look at your finances as a whole. Cancelling non-essential subscriptions like memberships of trade bodies can save you money each month and free up more funds to repay your debts.
Our debt advisors can work with you to find the best possible debt solution for you and your business. Together we can find a way to ease your debt concerns and put a plan in place so you can continue trading.
Call us now for free and confidential debt help and advice.