Running a business yourself is always a risky venture, and with many companies having to close as a result of the coronavirus pandemic, many businesses are finding themselves in a precarious position. Inevitably, it will not be possible to save every business, but if you are smart, and take the necessary steps, you may be able to prevent the need to liquidate your company. Here are a few tips that could stop your company from going bankrupt.
- Prioritize Debt
One of the most common causes of business bankruptcy is the accumulation of loan debt. When struggling, it can be attractive to take out loans to keep your company afloat. However, interest can cause your repayments to become unaffordable, and the worse your financial position is, the less favourable the terms of your lending options will be. If debt is causing your business to face potential bankruptcy, it is of critical importance that you take care of this before anything, since otherwise, the cost of your payments will only get worse. It is generally agreed that the best way to tackle large amounts of debt is the avalanche method. This involves first paying off the largest interest amounts first, then paying off the rest of your debt by how much interest they accrue.
- Negotiate with Lenders
As mentioned earlier, high debt can be fatal for struggling businesses, but it is also the case that lenders will not want your company to fail for the sake of it. This is because, if your business fails, you will not be able to repay the loans that you took out. Liquidity will result in the handing over of your assets to your debtors, but these also might not cover the entire cost of the loans they issued. You should therefore seriously consider discussing renegotiating the terms of your loans with your lenders. In many cases, they will be willing to alter the terms of the loans to reduce interest or extend repayment deadlines. In certain cases, you may also be able to take out additional, lower interest loans, if you re-mortgage your home – AMF Equity Loans is an example of this type of lender.
- Eliminate all Unnecessary Expenses
Preventing a struggling business from going bankrupt necessitates a pragmatic approach. In practice, this means reducing or eliminating all unnecessary expenditure to maximise your profit margins. There are likely a large number of costs you can eliminate, however unpalatable it may be. You may therefore want to conduct an audit of your business to see where you can make savings. Employee benefits such as memberships and complementary lunches, off-site events, and high-priced contracts are all areas where you may be able to cut back on to save your company.
- Increase Your Business Efficiency
Beyond cutting unnecessary expenses, you may also be able to reduce your overheads by adopting a more streamlined and efficient business model. There are a number of ways you could potentially achieve this. Just changing a few habits can substantially reduce your utilities expenditure, for example, which can provide significant savings on monthly bills. Maximising employee productivity and cutting unnecessary staff can also help in this respect. Finally, if your business can be operated remotely, switching to a homeworking model could potentially save you thousands of dollars monthly by eliminating your rental expenses.