Corporate debt refers to the money that is owed by businesses rather than individuals or the government. According to the Federal Reserve Data, the corporate debt of the US is more than $11 trillion, and courtesy to the Covid-19 pandemic, the figure is increasing by the day.
If you’re a business owner and your company is also struggling with debt, you’re in for a treat. The following are a few ways you can manage your unmanageable corporate debt and straighten out your company’s finances at the same time:
Table of Contents
Analyze the Situation
First and foremost, you need to have everything on paper, loud and clear. Many people make the mistake of not keeping official records when it comes to debt management and payments. It’s a disorganized approach and it can affect your company adversely.
Thus, I always suggest analyzing the situation first. Know how much you owe, the interest fee on top of your debt, the amount you’ve paid back, and the deadline for the rest of it. Ask your accountant to provide you with the financial records of your company and check them out yourself. After that, start managing your debt and making monthly debt payments.
Go for Debt Consolidation
If the interest rate is high and you’re unable to make monthly debt payments, debt consolidation is what you should look into. It involves taking a consolidation loan to pay off your debt in full or in two parts.
Consolidation loans usually come with a minimal interest rate, so returning one won’t be a big problem. However, your company’s credit history needs to be great to secure a low-interest consolidation loan, or else, it won’t go in your favor.
Reduce Your Company’s Expenses
Whatever debt plan you go with, nothing is going to work well if you don’t reduce your company’s expenses. The idea is to direct as much money as possible to debt payments and that’s only possible if you save more money than you usually do.
For this, you can ask your employees to work remotely. It will help you save money that you spend on office resources, electricity, refreshments, security, and more. If not, you can go with the four-day work policy. Ask your employees to work four days a week and save money on utilities and supplies.
Outsource the Expensive Work
Last but not least, calculate the total monthly cost of your company and outsource the expensive work; for example, IT operations. Handling IT operations in-house is one of the most expensive things a company can do.
If you’re not an IT company and it isn’t your core operation, you should definitely consider outsourcing it. Hire a third party for less money and enjoy the benefits. The same goes for things like graphic designing and photography.
Winding it up, I want you to know that corporate debts are tricky to handle. You cannot pay them off while regularly running your company. Some temporary changes are necessary, so you shouldn’t worry about it. Here’s wishing you good luck!