How to deal with your business debt?

Many entrepreneurs go through sleepless nights worrying about their business debts, and the cases have gone up after the pandemic hit the economy last year. If sources are to be believed, nearly 49% cannot manage their current debt. Indeed, it is one of the biggest challenges for small business owners, especially those who can’t offer their products or service online.

However, there are smart ways to deal with it. In this article, we will learn about the top ways to deal with business debts without tripping the law in the first place.

Top Ways to deal with Business debts

Get budget-friendly loans

While getting business loans is now no more ahead scrambling task, choosing the perfect loan partner is still tricky. During the search, you can stumble across a lot of loans that may interest you to take home a big amount, however in the long run; they might not be perfect for you. This is why it is always critical to calculating the debt coverage ratio before signing up for any loans. As debt coverage ratio is calculated keeping in mind your overall income, interest and principal payments of the debt, they help you decide the best loan options.

Even more, many banks and private institutions often use the same method to calculate your eligibility. Although an average score of 1.15 is most commonly accepted, lower scores mean you need to think about your cash flow sources. Professional debt management companies often advise people with lower scores to stay away from signing business loans until and unless they have a steady cash flow to ensure regular payments.

Dealing with stagnant inventory

When applying for a loan, it is always essential to have a higher income than the amount due for loans. A better way to ensure this is to get rid of stagnant or access inventory. All inventories come with a specified time limit to their benefits and should be used or sold within the duration. But failing to do so ends up creating more cash problems with limited income sources.

If your business to has the same problems, getting in touch with professionals might do wonders. They can help you work out with the expired inventories or follow a specific procedure where you can purchase consignment inventories. Investing in such inventories not only helps you create a good cash flow but also allows you with rights of return for unsold goods. Thereby helping you lower the pressure on your business debts by several folds.

Talk to the card-issuing authorities.

Credit card debts amongst businesses are a common occurrence. However, keeping it unresolved for quite a long can attract negative reports on your credit report along with piling up of business debts. In these situations, balance transfers are the safest way of getting more time if you cannot make the payments within the due date. The idea is to transfer the balance to a card charging comparatively lower interest rates, allowing you to settle the balance at a much lower rate.

For this, you can start by talking to your card issuing authorities. Individuals with good credit scores and nil negative accounts can apply for low-interest charging credit cards. While this may not seem that much of an achievement, it surely helps you save thousands of dollars with each transfer.

Future-proof your debt

Keeping the current pandemic aftermath in mind, the lines of credits are expected to go up by 25% to 50%by next year. If it happens, paying off your high debt and variable loans will be next to impossible. As of now, the interest rates are under control. So, if you know you're going to need a loan in the near future, it is better to go for a fixed-rate interest loan before they arise.

The rate of interest will be maintained for a specific period to ensure you a low pay rate even if there is a hike in the future. Therefore, just look for what type of loan you are carrying- fixed or variable. It’s better to pay off the variable loans first before you find yourself in more debt than required.

Consolidating debt

If you want to low your interest rate and pay off the debt quickly, consolidating debt would be your ideal bet. It enables you to club all your different loans into a single low-interest loan for your ease.

Conclusion

If you're still unsure how to deal with it, consider taking help from an expert from Capital Hills Dubai. It is one of the best debt management companies in the UAE. You will get timely and efficient advisory for debt and delinquency to keep yourself out of any financial trouble.