One of the great challenges of owning a small business is covering costs without drowning yourself in debt that stunts future growth. Debt is most often the cause of the bankruptcy of new ventures. Declaring bankruptcy is expensive, but also ruins credit which makes future financing very difficult. In order to start out in the best way possible, of course it would be ideal to have no debt at all, but a small business cannot launch or grow without financing of some sort. A more practical approach is not to avoid debt altogether, but to ensure debt is manageable. Only borrow what you need and look for the best possible loan options.
The next important step in avoiding too much debt is to ensure you get the lowest interest rate possible. Getting a loan from a traditional source like a bank is difficult and takes time. If you are already struggling with debt it will be even more unlikely you will get financing from such institutions, but if you do the rates will be comparatively high. Other inadvisable high interest rate lenders are credit card companies who make most of their revenues from high rates on credit card balances and cash advances.
The increase of internet lenders has led to an explosion of better options at lower rates than banks. Just fill out a small form and financing can be available within days from a variety of online lenders. Also, these lenders loan in smaller amounts than traditional banks, making the possibility of a loan more likely.
Another overlooked option is the home equity loan. You can borrow from yourself to cover your debts by using the assessed value of your home to receive cash. Interest rates on these loans are low and repayment is highly flexible, so you can manage your own cash flow needs. You should also consider consolidating high-interest loans into one, lower-rate loan to save money. You can extend the term of the any loan to reduce monthly payments.
Government loans and grants are another viable choice and provide valuable services at lower cost. The federal government has a business loan program run by the Small Business Administration that backs loans of all kinds to fit your needs. Your city, county, and state also have development offices that are motivated to help you find financing since a successful small business like yours in their community contributes to their economic health and growth.
Whichever method of debt reduction you choose, make sure to research all the options and decide which on is best for you and your business.