When the pandemic hit us back in 2020, it created immense difficulties for us all. For business owners, the resulting financial hardships were somewhat softened by the federal government’s offering of CEBA (Canada Emergency Business Account) loans. While the lost income supplements were helpful for a while, businesses were met with the looming requirements to pay the loans back.
Twice extended, the federal government’s repayment deadline was firmly set as January 18, 2024. Repayment now incorporates the full principal amount plus 5% annual interest. This has made debt management crucial. Here are five tips for small business owners to better manage their debts:
1. Prioritize your debts.
It’s important to be clear about your outstanding debts and develop a strategic plan to settle each of them. First things first, prioritize repaying the debts that have the highest interest rates. Gradually work your way down to the debts with lower interest rates. This helps to minimize your interest expenses.
Don’t hesitate to get in touch with your creditors to inquire about options for payment plans or debt restructuring. In many cases, the Canada Revenue Agency (CRA) will work with business owners to devise repayment plans for past debts.
2. Renegotiate or refinance.
As mentioned, it pays to ask for a little understanding and assistance from your creditors. There are various ways to ease the pressure of your debt repayment responsibilities. Discuss whether or not you can extend the terms of the repayment or secure lower interest rates. Refinancing your debt may enable you to take advantage of lower interest rates in the market. By renegotiating the terms, you may even be able to reach a settlement.
“Typically, you’d want to contact your creditor to propose a deal once they’ve already written off the balance or transferred your account to a collection agency,” informs Richard Sklar of Ontario’s debt-relief agency, David Sklar & Associates Inc., “Or, you can reach out if your debt is past due, usually by 90 to 120 days. Before that, it’s unlikely that your creditor will be open to a settlement as they may believe you’ll catch up with your payments.”
3. Better manage your cash flow.
Smart cash flow management is an excellent way to both climb out of debt and grow your overall bottom line. Implement savvy cash flow management practices such as offering special discounts to your customers. This won’t just help to stimulate sales, but assist you in procuring payments quicker.
For example, you could offer a 5% discount to clients who pay their invoices with seven days. Alternatively, you can charge your clients interest if they take more than 30 days to submit payments to your company.
4. Diversify your revenue streams.
Have you yet to sell your products online? Adding an e-commerce solution to your list of ways to clear inventory is a fantastic method of growing sales. Do you offer a subscription-based service? Doing so will help you to generate regular-basis revenue.
“There are increasingly more sales channels available to a business such as selling online and third-party sites like Amazon,” TD highlights, “Some businesses sell monthly subscriptions to users, others license their intellectual property or joint venture with complementary businesses to sell on their behalf.”
5. Implement cost-cutting measures.
Examine areas of your business where the money you’re spending isn’t generating the types of returns that make it worthwhile. Do you have any non-essential expenses? For example, you may be paying rent for a business space that is underutilized. Perhaps, it’s time to downsize in order to reduce rental expenses.
At Divvia, we work to grow your business with our scalable payment processing solutions. To learn all about them, please don’t hesitate to call us at 1-877-748-2884 or send us a message on our Contact Us page!
