25 Jul What To Do If Your Company Is In Debt
A company in debt can be a serious matter. Debt can be tied to crucial company assets and by taking it on you run the risk of losing everything that your company might have to offer.
Sometimes taking on debt can be necessary and in this situation it’s best you pay it back as soon as possible before it becomes an issue.
Here are a few things your company can do if it ever finds itself in debt.
Assess The Situation
First, you have to figure out exactly how much debt your company currently has. You should already have a system in place to keep track of your company’s finances. If you don’t now is a great time to start. Get a good idea of how many accounts hold debt and what the interest rates are.
Making a list of your debt can help keep in right in front of you. This way you know exactly how much debt you have left to pay off. Then figure out if there is anything you may be able to sell back to the seller. This can include anything purchased for your business that may have increased on the debt you currently owe.
Keep To A Minimum
While paying off your company’s debt it’s important you don’t keep spending money on things you don’t need. Say you put a certain amount toward your debt total only to turn around and spend the same amount on supplies for your company or a fancy lunch out for your employees.
This defeats the purpose of paying anything towards your debt in the first place.
Try cutting back where you’re able to. Buy the minimum amount required for your company to get by until your debt is completely paid off. This may mean going generic on the many reams of paper you may use or holding off on any major and expensive software purchases.
You can also try cutting back on the hours your employees work. If you walk by and see an employee with nothing to do, maybe send them home a little early in the day to save some money.
While these are small adjustments in themselves, they add up to a large total every month.
Determine A Pay Back Method
Determining a pay back method can be the hardest part of the debt process. Typically when you acquire debt it’s because you couldn’t afford to buy something outright. When there’s debt it’s important you come up with a monthly solution for it quickly.
While your lender will generate a monthly payment plan based on the amount borrowed and the interest rate you received it might be smart to create your own payment plan that is slightly higher.
Can you find room in your budget to pay a little more than the minimum amount due every month? Doing this will help you not only offset the interest you are being charged but ultimately help you get it paid off quicker.
Make sure while you are devoting a little more to your debt bill you aren’t neglecting your other monthly obligations. You don’t want things to stack up on you. You’ll be right back in the same financial position.
Is Bankruptcy A Solution?
Have you come to the conclusion your currently monthly payments are too much for your company to pay back and still make a profit? There are options for this situation and one of those is to file for bankruptcy.
While bankruptcy is commonly frowned upon, if done properly it can definitely be used as a tool help your company recover financially and give it a fresh start.
If your company qualifies you can go the route of a Chapter 11 bankruptcy and still maintain control. This allows you to restructure and reorganize your debt to become profitable again. During a Chapter 11 your business will be able to consolidate your debt and create a manageable payment plan.
All decisions must be voted on by the higher ups, such as bondholders and preferred shareholders before any final conclusions are made. In the case your company cannot come to an agreement on the monthly payment of your debts your company can go into liquidation.
While it may feel like all hope is lost if your company is debt it doesn’t have to be the end. There are many options for you that can help and get you back on the right track.
After your debt is paid off and you continue business as usual you have to stay vigilant. You now know how easy it is to get into debt and you don’t want to get back into the same boat you are in now.