Any business owner can tell you that cash flow is critical in order to run a successful business. But when your equipment fails or an opportunity comes along to scale and you’re running out of inventory, you might have to go into debt in order to keep that cash flowing.
While debt isn’t ideal, it can be an effective way to keep growing your business, so don’t feel bad if you need to take on a business loan in order to expand or maintain your business. The key to making the most of a loan is paying off debt quickly.
Tips for paying off business debt
When it comes to paying off business debt, timeliness is key. The sooner you pay off your loan, the less you’ll pay in interest and the sooner you can keep moving forward! If you’re trying to pay off business debt quickly, here’s a couple of tips to keep in mind:
Always have a plan for how you will pay off your business debt before you borrow the capital. Debt gets a bad rap, but the fact is: when you have a solid strategy in place for paying off your debt before you even borrow the money, you put yourself in the driver’s seat. Your debt does not control you, you are in control of it. You have a say in when you borrow, how much you borrow, and how quickly you pay it back. So create a gameplan beforehand and stick to it!
Budget your debt
When you sit down to make the budget for each month, be sure to make debt one of your top priorities. It needs to be right up there with your bills and other necessary expenses. Commit to paying off x number of dollars every single month (be reasonable, though) and don’t skip a payment. You can do it!
Make extra payments
Fifty dollar here, a hundred dollars there… You might feel like you’re taking slivers off of your debt with extra payments, but don’t underestimate their combined effect. Every bit of extra you can put towards your business debt makes a difference. Making extra payments not only shortens the life of the loan but also means less interest.
If it feels like money is tight and you just don’t have the extra wiggle room to make an extra payment, look for creative ways to boost your income and bring in more capital. Perhaps you could offer a new product or up your social media game to bring in more customers. Have a sale to incentivize buyers, or put in some extra hours. Experiment a bit and do whatever you can to throw extra money towards your business debt. You might be surprised by how quickly you’re able to pay it off!
There’s value to bringing more in and there’s value to not spending as much. So to help make room in the budget for paying off your business debt, try to cut any expense you can. Look for ways to save such as switching to a cheaper product temporarily or cutting an expense that is a nice-to-have vs. a must-have. If there are certain things you’ve been wanting to purchase for your business, defer those purchases until you’ve paid off your debt. If there are expenses that don’t give you a good return on your investment, cut them out. If you’re strategic, you’ll find it is much easier to chip away at that debt than you thought.
As you stay the course and work to reduce your business debt quickly, remember that being debt-free IS an attainable goal. So make a plan, keep your eye on the prize, get creative, and don’t give up.