All startups face an uphill climb when they try to give shape to their brilliant ideas. It may sound very impressive to start a business but executing the plan is a real tough task. All aspiring entrepreneurs usually start from scratch and have insufficient funds facing a lot of challenges to keep them going. They are under more pressure as compared to an established business both financially as well as in terms of executing their day to day operations.
The journey is not at all smooth having a lot of ups and downs which is why starting a business and running it successfully needs not only guts but also a clear foresight essentially. Apart from that, you will require the right ingredients, maximum diligence, and better planning so that you deliver the results as desired by you and expected by others working for you.
Lack of funds
Among all challenges that are faced by a startup, lack of sufficient funds seems to be most significant and predominant. This is the reason why several aspiring entrepreneurs look out for multiple alternative sources to gather more money to secure both the present as well as the future of their businesses.
The end result is that you have to repay their borrowed money to numerous creditors every month and at regular intervals. In addition to that stress, they must also ensure that their business performs well enough to generate enough revenue to pay off those debts along with other essential expenses. This adds to the difficulty level, and most entrepreneurs succumb to this immense pressure after a point of time.
A lot of intense hard work is required by the startups to continue with their business, and they have to spend uncountable sleepless hours. Things will start to get frustrating very soon as entrepreneurs have to worry constantly about paying off the multiple loans and making all ends meet. This pressure results in losing sight of the business goals which leads in one out of four startup businesses to fail.
Better way to manage business finance
This situation that leads to a crisis makes the startups wonder whether or not there are any other ways to manage their business debts. Negotiating with the creditors and bargaining for a reduced rate of interest often does not prove to be very effective. This starts to affect the credit scores adversely as well. In such situations, people start to lose hope and experience disillusioned vision, but all hope is not lost for new business owners. You can take a debt consolidation loan. However, it is recommended that you go through and learn the debt Companies reviews to find out how effective these loans proved to them before you make a final decision.
The features of it
A debt consolidation loan has specific characteristics and attributes that you must know and act accordingly.
- It is a single loan usually of a large amount
- It has a very low rate of interest
- It is the process of combining all your loans into one
- You can pay off your other loans and focus on one monthly payment now.
Impressive as it may seem, there are a few factors that you must consider before consolidating your debts so that you are sure that this is the best option available for your business. The specific factors that you need to consider understanding as well as get a clearer picture of the financial situation is:
- You will still have to pay back every month, albeit only one monthly bill of a reduced EMI amount
- Consolidation loan does not repay your debts, but it only reduces the number of debts combining them all into one
- You will still have to plan your finance well and meticulously to enjoy the mental peace and not fall behind your monthly payments
- If you are unable to pay off the loan on time, the financial management of your company may be difficult and may slip out of your hands
- You will have to re-evaluate your income and expenses and re-budget
- You may also have to cut down a few areas of expenditure if possible and set up a proper plan to create a savings account
- You will have to focus on ways to amplify the promotional activities of your services or products
- You will need to generate more sales and
- Adjust your lifestyle as well to increase savings considerably.
Lastly but most importantly, you must refrain from taking on more debt until the time you fully pay off your existing loan. Remember, if you open a new line of credit it will keep you stuck to the vicious circle of debt forever. Therefore, spend according to your business income and rent or hire equipment and tools till you reach a favorable time to own it.
Tips to consolidate business debts
It does not take time to acquire business debt, but it takes time to get rid of it. Following strategic steps will help you to achieve your goals.
- First, make sure that debt consolidation is the most appropriate option for you
- Next, look for the options that will help you to continue with the payments
- Follow that by looking for a reliable and reputable debt consolidation service provider and
- Read between the lines and ask a lot of questions to make sure you are on the right track and the loan will not further jeopardize the financial health of your business.
You can avail any one of the two types of debt consolidation loans – secured and unsecured. Secured loans will need collateral but will carry a lower rate of interest, but if you want to take an unsecured consolidation loan, you will have to pay a higher rate of interest as it will not need any security deposit.
Choosing a secured loan is best if you still have control over your business finance, but if the debt is beyond manageable limits, it is not a wise decision. This is because; in a worst case scenario when your business goes bankrupt you may lose the home or any other asset that you may put up as collateral.