Whether you run a small entrepreneurial venture or are responsible for hundreds of staff, business debt can be very frightening. In a tough economic climate, business mistakes are often punished harshly and many companies buckle under the weight of debts. If you are worried about business debts, confront the situation and starting planning your debt control strategy. Official guidance and explanation of terms regarding business debt and insolvency is available online.
Be Honest About the Situation
Honesty really is the best policy when it comes to any kind of debt. Being responsible for a great deal of debt can be a very isolating experience, but if you refuse to face up to the amount your business owes, you won’t help yourself or your staff in the long term. Once you have confronted the extent to which your business is in the red, you can begin to make plans and take control of the situation.
The Two-Pronged Approach
If your business has any hope of recovery, it must adhere to the two-pronged approach. This involves reducing outgoings and increasing income to allow a struggling company to shrink its debts and move on. Although this may seem very difficult to put into practice, don’t despair! Start by cutting down on your spending and give up office space if possible. If your personal finances are caught up in your business debt, then reducing spending in your personal life is also necessary. Depending on their situation, some people give up second cars and downsize their homes to help reduce business debts. To increase revenue, you could consider taking a second job on the side or cut products and services that don’t seem to be generating income and focus on the aspects of your business that are more profitable.
Try an Individual Voluntary Agreement
An Individual Voluntary Agreement is a formal agreement between your business and your creditors and it is supervised by a Licensed Insolvency Practitioner. These agreements are beneficial because you can stay in control of your assets and your business can continue to trade without the restrictions that accompany bankruptcy. Debtors are usually able to keep their homes under the IVA and they can continue to live without being crippled with worry about possible repossession. Look for an insolvency and recovery firm that offers a free advice and consultation service like Gibson Hewitt, so you can make sure that the agreement is right for your business.