Due to unstable markets and the ever-changing economic circumstances, applying for a loan has become the saving grace of many businesses. However, only a small number of business owners are able to pay back their debts given the lenders’ high-interest rates. So, if your family business fell into debt and you want to figure a way out of this dilemma, the good news is that your problem is actually quite common, which means that there are many foolproof solutions you can try. The following financial options can help you save your family business in no time.
Apply For An IVA
If your business is based in England or Wales, then you are in luck, as you can apply for an IVA, individual voluntary agreement. On the other hand, if your business is based in Scotland, you can apply for a protected trust deed, which is fairly similar to an IVA as both can help you avoid declaring bankruptcy. For family businesses, in particular, an IVA is one of the best debt management solutions out there, as the process of applying for one is quite simple. First off, you need to hire an insolvency practitioner, usually an expert lawyer or an accountant, to apply for an IVA on your behalf. To devise a repayment plan, the practitioner then assesses your income and the sum that you will be able to pay back.
Next, your lawyer or accountant will communicate with the lenders to get their approval. If the lenders approve of the repayment plan, you will pay back your debt in monthly installments over a six-year period. After the repayment period is over, your lenders will write off any remaining debt that you haven’t been able to pay back.
Boost Your Income
If you think that your family business can still be salvaged without resorting to desperate measures like applying for an IVA, then the first thing you should think of is boosting the income of your business. Take a look at your budget; are you underselling your services? Are your competitors earning more by simply charging higher prices? Offering competitive prices is a terrific strategy to attract customers, but lowering your prices too much is counter-productive. If your business has this problem, it is time to increase your prices, provided that you continue to offer your customers high-quality services and products. You may lose some new customers this way, but you will be able to pull family business out of debt faster.
Reduce Your Costs
Take a look at your budget; are your expenses higher than your income? You will most probably find that your business is losing money because of your poor spending habits. Accordingly, you should look at things you can do without. For instance, you can sell off any unnecessary equipment or even move to a smaller headquarters if you cannot pay the rent.
Another thing you should consider is laying off some workers to cut some costs. Although it may feel like a cruel thing to do, you have to cut your losses, especially if you are already struggling to pay their salaries. Moreover, you may be tempted to purchase new equipment or expand your business, thinking that such a strategy will help your business generate more income, but this will only drain your resources. After all, you need all the liquidity you can get to repay your loans. So, forget about any expansion plans you might’ve had, and focus all your resources on paying off your business debts.
Apply For A Big Loan
Applying for another loan might seem counterintuitive because your debt issues are what drove your business into the ground in the first place! However, it is a totally safe option if you think your business will generate enough income in a few years. This strategy is known as debt consolidation. Basically, you use your new big loan to pay off all your other smaller ones; thus, you end up with just one monthly installment instead of several ones, but for this strategy to be effective, you must get a good deal. Look for creditors who offer low-interest loans and long repayment periods. Otherwise, you will have another huge problem to deal with, so proceed with caution.
Running a family business and ensuring its success can be hard, even if it is generating enough income, so imagine how hard it can be if its owners are struggling with debt issues! To dig your business out of this hole, you must make smart decisions, such as consolidating your debt, cutting back on costs, and boosting your income. If all fails, you can apply for an IVA by enlisting the help of an insolvency practitioner. Most importantly, when your business recovers, never make the same mistakes again and make sure to improve your spending habits.
I’m a 20-something stay-at-home mother and wife. I have an amazing husband, a beautiful daughter, two loving dogs, and a lazy cat. I wouldn’t change my life for anything! I love to read, listen to music, cook and blog!
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