2024 saw a record number of businesses filing for bankruptcy due to business debt, and according to an Associated Press analysis, there are around 7,000 “zombie” companies, a term used to describe companies that are laden with debt they’re barely able to pay the interest on other loans, and never mind anything beyond what they have borrowed.
But it’s not just publicly traded companies succumbing to poor cash flow and financial problems due to high levels of debt. Businesses of all sizes are facing these issues right now.
So if you are struggling with debt as a business, what exactly are your options?
Generate Another Income Source
Beyond your core services or products, are there any other options you can “sell” about your business or yourself to help generate extra income? This could look like strategic partnerships with businesses to help expose each other to a greater audience to enhance revenue, or you might find marketing your products in a new niche can be perfect for you. For some business owners, taking up coaching or becoming a speaker at conferences or events could be the perfect revenue stream.
The key here is to broaden your revenue base so you have fingers in multiple projects, not just one income stream.
Implement Cost-Cutting Measures
What we mean here is to go beyond reducing expenses. You need to fully audit your business and look at every single operation. Then, once you know everything there is to know, including staff hours and expenditure, equipment bills, stock, software, etc., you need to look at whether or not it’s worth it and if it’s making you money. Every single person working for you and the processes needs to add value, and if it’s not, you need to look at cutting it. This helps create a lean, agile operational framework that will, in time, help you reduce costs, and you can use this towards paying off debt.
Explore Help Options
In the first instance, you need to consult with a financial advisor to get a clearer picture of where you stand and what realistic options are available to you.
From here, you need to find experts who can assist you with your debt, so finding companies that offer specific business debt advice is advisable.
Companies like Delancey Street can help you navigate the process, and these companies can be instrumental in finding a structured solution to debt, be it consolidation, negotiation, or a debt management repayment plan that actually works for your situation.
Talk to Your Lenders
It might sound counterintuitive, but your lenders don’t want you to default. They want you to repay what you borrowed because chasing you for your missing payments costs them time and money.
One of the best options is to be upfront and tell them what is happening and what you’re struggling with. If they know your circumstances better, they’ll know how to help you. Now, not all lenders will be amenable to changes to terms, but you never know unless you ask. You might find that you can extend your repayments to reduce your monthly repayments. They might be able to negotiate a temporary repayment pause so you can resolve a short-term cash flow issue, or you might be able to access a reduced interest rate.
The trick here is to go into these conversations prepared. Be honest about your position and work with them to find a solution that’s beneficial for all parties.
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