When you first dreamt of your business idea, I’ll bet you never envisaged being consumed by debt and wondering how you’re going to keep yourself financially afloat. Sadly, for many business owners, this nightmare is very much a reality.
If you feel as though you’re losing your grip on your business’ finances then help is at hand – you can find out more about debt advice and solutions, just by clicking the link.
Recognising the signs of financial difficulties and understanding the most common causes of business debt could help you remain proactive and identify financial issues before they become too big to handle. Read on to discover the most common causes behind business debt.
Poor money management
Sadly, if you don’t know how to handle finances then you’re going to struggle to keep your business afloat and get your financial balance right. If you don’t have a budget, your overdraft fees are slowly building, you’re constantly relying on credit cards to see you through the month or you simply don’t know what you’ve got coming in and going out, then you should seek financial advice immediately.
Start cutting back on all your expenses and figure out where your money is going each month. It’s a daunting task, but you’ll have a better understanding of your finances.
A financial emergency
Sometimes even the most stringent of business plans fail to factor in any kind of financial emergency. And it’s these sudden expenses that can financially cripple your business and make it difficult to pull it back from the brink. A natural disaster event that damages your business premises, a personal illness or injury, even a pandemic like COVID 19. Events like these are sometimes unavoidable, so consider building an emergency fund to take from during unprecedented times. It might just save your business.
You’re living beyond your means
Just because you’re a business owner, it doesn’t mean you have to drive the latest BMW or head off on holidays three times a year. If you’re living beyond your means and way beyond your profit margins, then these habits could be your downfall.
Again, look at your expenses and figure out where all your money is being wasted. Make simple lifestyle changes such as investing in a cheaper car or downsizing your home to help save money and repay your current debts faster. It might just give your business the financial breathing room it needs to survive.
When you were together, there were two sources of income and both of you were investing in your future and your business. Now that’s broken down, your finances may be in doubt and your income and funding sources are thrown into question.
Where possible, speak to your partner about the future of the business, reach out to debt charities and sit down and create a budget. Figuring out how much money you really have is imperative at this stage.
No one wants their business to fail financially, so if you’re struggling or worried about your existing business debts, reach out to a debt advisor for more guidance.
Founder Dinis Guarda
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