If your small business is struggling with financial issues, debt reduction services might be the answer for you. Many American business owners find themselves in critical financial situations.
Those who survive are the ones who implement one or more debt reduction methods. To avoid bankruptcy, try to apply the following recommendations:
Cut Unnecessary Cost and Free Up Cash
Firstly, identify the areas of the business that got the company into debt. Secondly, tackle those extra costs. If customers or suppliers are not paying you on time, consider getting rid of unnecessary expenses such as costly phone systems and too much office space. Another way to free up cash is to sell unused equipment.
Furthermore, you should reduce business expenses the best possible way that you can. For example, if you are using a big office, try subletting the unused space.
Prioritize Debt Payments
Pay off the company’s biggest debt first. Probably, this means you should focus on paying your credit card debts. To sum up, try to pay off your highest interest rate debt, and continue paying all the others, taking into consideration the priorities.
Revise Your Business Budget
Before paying your debts, get a good view of your company’s financial situation. If necessary, revise your financial plan, and adjust it for unexpected cash flow changes.
A good business budget helps you see your income sources, as well as your costs, both fixed and variable. Do not hesitate to seek professional help when needed; you can hire an accountant or even an accounting company.
Speak with Creditors and Renegotiate Your Agreements
Open yourself up to your creditors and let them know your current financial situation. Then ask them if they can offer better deals or work some other terms of your agreement. Make your statement clear without being demanding or putting too much pressure on them.
Companies who offer debt reduction services can be the answer to your financial problems. However, they have their ups and downs.
Advantages of Companies Who Offer Debt Reduction Services
- These companies have experts specially trained for the critical financial situation you may find yourself in. They are professionals and can offer you the best-suited solutions for your business.
- They can create a plan for your company to become more organized when it comes to cost reduction and budget planning.
- Debt reduction companies help your business to effectively reduce costs and cut down unnecessary expenses.
- Their measure can help increase your company’s productivity, and improve the way you spend your money.
Disadvantages of Debt Reduction Companies
- Big fees. Debt reduction services, along with debt settlements, are not cheap.
- Short-term risks. You can cut costs and save money during your collaboration with the debt reduction company. However, after your agreement has finalized, your business could start a new round of raising debts.
How to Pick the Best Debt Reduction Services Company
When looking for a debt reduction company to work with, you should take into consideration the following things:
- Accreditation. The best companies are accredited by organizations such as the American Fair Credit Council (AFCC), the International Association of Professional Debt Arbitrators, etc.
- Longevity. The longer the company has been on the market, the more information you can find about it. Also, the company’s reputation is easier to be searched if the company has been long enough on the market.
- A clear, easy-to-read website. You can tell how well a company is organized and how well it functions by looking at its website. Moreover, if the website contains enough structured information, it will save you time. This way, you will not need to ask many questions when you meet the debt reduction company representatives.
- Low fees. A good debt reduction services company keeps its fees below the prices of its competitors.
- A reasonable and realistic timeline. For example, a company that promises you to lower your costs and eliminate your debts in less than a year is not a reasonable company.
- Extensive customer support. A good debt reduction company makes it easy for its clients to contact its representatives. Even online chat can be taken into consideration.
- Savings rate. Great debt reduction services also include a minimum or 30% saving rate. Search for a company that will help you reach that level of saving, after their fees, of course.
- Transparency. The debt reduction company you work with should apply a transparency policy in the way they make business and work with their clients.
To sum up, choose a debt reduction services company that is prepared to work within the payment and time parameters set by your creditors. Also, be honest with all your collaborators, about how much you are able to pay each month.