For many business aspirants, it is a very proud moment for starting their own business startup from nothing and running it successfully to build them as an established business among the other in the competitive business market. It has been surveyed that in general there are some percentages of the startups that cannot survive for more than a year and shut down before that. This happens because new startups focus very less on the budget management and consider the budget that shows the expenditure and ways of spending the money. They take a very less consideration of how the can manage and control their costs. In the starting, startups don’t have enough funding circles that can support them and help them in operating continuous cash flow. Due to which, the debt starts piling up, and poor financial management could not be able to deal with thus leading the startup either declare itself bankrupt or shut down with the great loss. In either way, bad management debts will be reflected. There are certain tips which can help in staying the startup out of debt and also help them in the running strongly.
- First of all, you have to be clear whether there is a need in the business for borrowing money. The key is to stay away unless it is needed. You have to analyze the financial situation and see if the need can be taken care of internally rather than working on debt from outside. The onset startup can manage with the small amount of equity once the profit starts flowing with stable revenue, you could work on the ways of expansion. For the smart progression of the startup, you could work on savings and loans received from near ones rather than starting on the big gauge of a large amount of debt. You could work out the ways and see if you can manage it and later with some resources working on expanding boundaries.
- You got to stay low for the first few years. You have to start making a list of all personal expenses and works on prioritizing the expenses. Your professional and personal expenses should have enlisted, and variables should be determined that could impact the expense. You have to eliminate the variability in the costs. The personal expense sometimes tries to curb your business production finance and, in the beginning, you must not work on that. Your expenses should be reduced or eliminated.
- If in the beginning, you are having the righteous need for some extra financial help then try getting the loan from the business aspect. Carefully assess the options for the low-cost solutions like lowers interest rate and should not jump onto the high-interest Some traditional banks follow the approach of the collateral asset on the loan approval. This is for the security, and in case of any default then the bank will be considered selling off the asset to claim their loss.
- Once you get the approval for the loan make sure to use it effectively otherwise you might convert into debt. Try using the money for the revenue generation. By doing this, you will be focused on its utilization and will not spend them on other expenses which can be of not that important. Often in the startup business, people borrowed money but couldn’t able to put them in effective use and thus ends up in debts. You could think of spending them in luring more clients and customers so, for that you can put them to use for marketing strategies and business propagation. You can take some business advice from the financial advisor of your startup, and they will let you know some great investing options.
- You have to think of a reduction mechanism, especially for the capital expense. For the initial years of business, you are required to follow the approach for the minimum purchase of assets like office décor equipment till the time your business take off. Your starting footstep should be on small-scale and by the time your business takes off, and you start getting a stable revenue and profit. You can then proceed with modifications and expansion. Most people made a mistake while setting up the startup and often incurred debt before launching the business in the market. And later the rate of interest on the debt amount starts increasing which makes difficult for the owner to repay on time. For business need, you can think of outsourcing options which provide a solution at a low cost.
- While working your ways to get your company out of debt crisis, you can think of generating some extra income so that your cash flow should b stable and constant. You will get some extra help, and you will easily deal with the debt problem. You can try outsourcing your services to other ventures. At least by doing so, you will manage to deal with expenses and try saving some extra for eliminating debt as soon as possible. You can try selling your products through merchants, try selling them online on eBay or Amazon with your label on it. You can even create your own website for selling your products. This can be temporary till the time you get a hand on the business revenue.
- You have to come up with a plan to eliminate the debt without putting the business in danger of bankruptcy. Your plan should implementable in the faster ways. You can even think of some ways by cutting on expenses and saving some portion from your profit for repayment. This might be going to some time but if maintained steadily then you finally going to have freedom from debts.
In the beginning, startups do face some challenges while dealing with finance and debt. In achieving the stable and profitable business, the startups might be going to take some years, but in the meantime, the magnitude of expense should be in control. The debts should be checked and reduced timely.