As the common saying goes, “you have to spend money to make money.” However, not all investments become fruitful and turn a good profit. When businesses fail, you are not only left with a zero in your bank account, you might also find yourself in debt that you do not know how to crawl out of.
When you are facing insurmountable debt, how do you get out of it?
Get a Debt Restructuring Advisor
It might sound counterintuitive to spend more money and hire people to help you get out of debt. However, a piece of advice from someone who has experience getting out of debt will significantly make your situation less of a burden.
Debt restructuring is the process wherein a company or an individual can enter negotiations with creditors and rearrange the terms of debt payments. Debt restructuring may reduce the interest rate you will get and allow you more time to pay off what you owe.
Hiring an advisor can aid you throughout the process. There are debt restructuring advisors in Sudbury and all across Canada who will be able to create a plan that will get you out of a financial crisis.
Prioritize Debt Payment Based on Interest Rates
The first thing you have to do when facing debt from multiple sources is to sit down and list everything you owe. Prioritize paying those that have higher interest rates so you would not be in a bigger debt in the future. This means that, most likely, you will be paying off all your credit card debts first. However, if you had an agreement with a creditor or supplier and they may come after your properties, you also should put those debts on top of your list.
Once you have some balances paid off, close newer credit accounts. You only need four open credit accounts to have a positive credit score, according to AllBusiness. As soon as you are done paying off what you owe, eliminate accounts that are only less than a year older.
Cut Unnecessary Costs
Review your spending and budget. You have to identify areas where the money is bleeding out and find ways to reduce expenses.
Create a budget and strictly enforce it. Since you should be focusing on paying off your financial obligations, during this time, you should be more careful where and how you spend your money. However, you should have enough to cover necessities such as rent, food, electricity, internet connection, etc. If possible, look for avenues where you can get cash to flow back into your business. Free up cash by selling equipment that is not necessary for your day-to-day operation.
Try to Increase Income
Work like you have never worked before because now is the time to introduce new products or services. Host sales to move your inventory out faster and offer irresistible deals to your loyal customers. These strategies will lower the profit you normally get from a product or service, but it will increase the number of items sold.
Throughout the process, you will have to make some painful sacrifices and major changes. It will be difficult, but not lose motivation. Stay strong. Getting out of debt, no matter how large of a sum you have to pay off, is possible.