Communication is Key
2020 has been a tough year. The pandemic and ensuing recession have taken their toll on small businesses, leaving many business owners either dealing with the worst or preparing to do so. Even after making cost-saving moves, you might be wondering, “What happens if I can’t pay my bills or make my payment on my equipment?”
When you can’t make a payment on an equipment lease, your credit and business are at risk. However, in many cases, you can find a way to make ends meet without bottoming out your bank account. If you find yourself in this situation, here are a few tips to minimize damage to your credit and possibly avoid losing equipment essential to your business.
Don’t: Make Rash Decisions
If you’re struggling to make payments, you might feel tempted to throw in the towel, have a “going out of business” sale, and declare bankruptcy. However, before you give up hope, simply step back and take a deep breath. Many businesses recover from hard times, and giving up too quickly can hurt you in the long run.
Do: Seek Alternative Sources of Income
One of the best actions that you can take if your business is in trouble is to find new ways to generate income. This might involve tried-and-true methods like selling assets or it may involve a bit of creativity on your part.
The alternative sources of income that you seek should depend on the type of business that you run. Crowdfunding, for instance, can be effective for businesses with strong local followings, or companies with strong credit can apply for short-term financing. If your business is struggling due to changing regulations or consumer preferences, you could also take your current business model in a new direction to create new revenue streams.
Don’t: Dodge Bill Collectors
Another major mistake that struggling business owners make in a cash crunch is dodging calls from bill collectors. When you have to make tough decisions about your company, you may be tempted to avoid bill collectors until you have money to pay them. However, that’s actually one of the worst mistakes that you can make.
Lenders generally react poorly when a client goes silent, and they often assume the worst. You may be hit with late fees, or your creditor may end up selling your debt to a collection agency. However, if you communicate with them, you can usually find a solution to help you pay off your debt while you get back on your feet.
Do: Plan Your Next Move
When your company is underperforming, you need to take a step back, look at the big picture, and come up with a plan. This may entail restructuring your business, selling off bad assets, or reevaluating your marketing strategy.
You can also bring in professional consultants to help you reorganize your business or come up with new revenue streams. These advisors can offer a fresh perspective on the state of your company, and hiring them will show your creditors that you are serious about getting your financial house in order.
Don’t: Blindly Cut Costs
Cutting costs is an important part of getting your finances under control, but you must carefully do so. Many business owners who are in a pinch become so focused on their bottom lines that they forget about the big picture.
When reducing your expenses, you always need to examine how your actions will impact your business as a whole. Layoffs, for instance, might seem like an effective way to cut costs in the short term, but if done improperly, they can hurt employee and customer satisfaction. So, as you make these tough decisions, you need to think about their impact on your company in the long term.
Do: Work with Your Creditors
If you can’t make your monthly payment, then one of the best actions you can take is simply calling your creditors. More often than not, they will work with you to come up with a plan to pay off your debt. This could entail deferring payments or renegotiating your payment plan.
Your lenders are human, too, and many of them understand what it’s like to go through hard times. At GLFS, we frequently work with businesses to help them get back on their feet without hurting their credit. If you’re one of our clients and are struggling to make payments, contact us.