A Guide for Getting Out of Business Debt

Photo Credit: Pexels.com

If you’re a small business owner, regardless of whether you’re in retail or real estate, struggling with debt, you aren’t alone. According to Statista, only 21 percent of small to medium-sized companies in the United States reported having no debt in 2020. While it’s not uncommon to owe money as an entrepreneur, you also don’t want to lose oversight of your financial obligations. Courtesy of Teaching Real Estate 101, this guide explains what you can do to get out of debt and pave a path to a brighter future.

Make a list of all of your debts

The first step to getting a handle on your finances is to gain comprehensive oversight of exactly what you owe and to whom. Sit down and make a list of every debt you have, from back taxes to supplier IOUs, unpaid rent, and more. With this information, you can prioritize your debts and figure out which one to pay off first.

Debt.com explains that there are various strategies when deciding which debts to prioritize. For example, you can save costs by prioritizing on the basis of APR. The sooner you pay off debts with a higher interest rate, the more money you’ll save in the big picture. Alternatively, you could target the debt with the lowest balance first, building momentum as you go.

Prioritize tax debt first and foremost

When prioritizing debt, there’s one type of IOU you should prioritize above all else: taxes. If you haven’t filed regularly, you may owe the Internal Revenue Service money. This can be a serious issue, resulting in allegations of tax evasion if not carefully handled. It’s unlikely that you will be able to get around paying back taxes.

Upsolve explains that many people erroneously think that filing for bankruptcy will automatically clear an IRS IOU. However, this is very rare. If you need help cleaning up your tax record and catching up on back taxes, trust Dixson Associates Tax & Accounting Business Advisors for help. They offer support for both state and IRS tax issues.

By getting your debts taken care of, you can lay the foundation for rebuilding your credit. This can come in handy if you decide to get a bank or private lender loan at some point to expand your business (if you don’t know the difference between a bank loan and a private lender loan, click here to check out this handy guide from Zenbusiness.com).

Look for ways to cut overhead costs

As you get your financials in order and pay down your debts, start laying the groundwork for smarter money management in the future. Start by looking for ways to cut overhead costs. Fast Capital 360 offers a list of suggestions to get you started, covering how to save on everything from software subscriptions to utilities.

Further, take a look at your team, assessing their productivity and time spent on core tasks. A time-tracking system can help ensure people are making good use of their hours at work. Also, look for ways that you can save time on your duties. As a business owner, you juggle many responsibilities. Are there ways you could handle them more efficiently?

Get organized with a budget to avoid future problems

Getting your business money matters under control after you’ve been in debt can be challenging. You don’t want to deal with the situation again in the future. To prevent a recurrence, create a business budget. Ownr explains how it’s done, including essentials like commercial rent, utilities, wages, debt payments, and more.

When you make your budget, also consider future taxes. Setting aside some savings every month to go toward future tax bills can help you avoid IRS issues in the future. Having an emergency savings fund can also be useful in case unexpected expenses arise, such as equipment repairs.

Tackling financial issues isn’t fun. However, the sooner you take care of outstanding money problems, the better. You can then look forward to a brighter financial future.