With these difficult economic times many are learning the downside of borrowing money. Debt payments are due whether or not you have the income to pay them. This is why I have always encouraged people to keep debt as low as possible and pay it off as quickly as possible. It is smart to pay off the highest interest rate debt first, then move on to the lower interest rate debts. Those who have kept debt low are sufferring far less than those who didn’t. In addition, those who had low debt can borrow money, now, when they need it most, while others have exhausted their credit limits.
This advice is a bit late for some, so if you’re looking for a business loan, it behooves you to keep your personal expenses separate from your business checking account and credit cards. Write yourself a check for your salary or distributions, then pay your bills out of your personal accounts. This keeps your books clean and easier for a banker to evaluate. Look into SBA loans which are currently offering some great deals.
Secondly, contact your lenders to see if you can get more favorable terms to help you get through these hard times. It never hurts to ask, and most companies would rather get less money than none at all. Contact your other vendors as well to see about extended payment plans to help even out your cash flow. Take a good hard look at your business’s future before you put your house and retirement savings on the line.
For the future, build a savings account, so you have the money for those surprise expenses. Set up lines of credit when things are solid, so it’s there when things are shakey. Be frugal with your purchases, always look for the best deals, be sure you are buying something you need versus something that looks cool. If you can get it used or refurbished and it still meets your needs, you can save a lot of money this way. Frugal is different from cheap in my mind. You need quality equipment to do your business efficiently, you just want the best deal for that equipment.