There comes a time for many SMEs where external funding becomes a necessity for maintaining growth and ensuring success. Whilst debt can be a fantastic tool to acquire the working capital your business needs to grow and expand, it has to be managed carefully.
One of the biggest mistakes SMEs make is taking on too much debt too quickly before they have the cashflow necessary to support their growing operations whilst also servicing the borrowed debt.
If you want to position your SME for success here at six tips to manage your business debt more effectively.
1. Organise your creditors
Make a list of your debt-related expenses and obligations. This could be on a daily, weekly or monthly calendar. Include both fixed and variable expenses so you can adjust your expectations when rates or fees change. Note the interest rates and charges attached to each repayment to understand where your money is going and when. Having your debts mapped out will help you to not only stay on top of repayments but also gives you a planning tool should you wish to take on more debt in the future.
2. Prioritise your repayments
Work on a strategy to optimise your cashflow. There are a couple of ways of doing this. Many businesses choose to pay down the smallest debts first to eliminate debt fast by reducing the number of creditors you owe, which is easy to stick to and provides regular satisfaction as you quickly hit your goals.
For other businesses, they may choose to pay the highest interest rate loan first. In terms of minimising your total expenses, this is the optimal way as loans with higher interest rates will obviously cost more to repay so by eliminating them first you’ll save money on interest.
3. Negotiate
Don’t be afraid to negotiate payment terms with your creditors. Ask for longer payment terms to maximise your current cashflow. Obviously, this needs to be balanced with interest charges because the longer you take to pay out the loan the more interest you will pay. Short-term cashflow and liquidity is a business killer so if you find yourself in this position negotiating lower repayments is a good strategy for retaining more cash week to week.
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Who is OptiPay?
OptiPay, one of Australia’s leading business finance providers, has been dedicated to helping small business owners solve cash flow challenges for over a decade and has provided $1.5 billion in business funding to more than 500 Australian businesses. OptiPay specialises in modern financing solutions such as invoice factoring, invoice finance, debtor finance, and lines of credit. OptiPay’s mission is to support business growth providing liquidity in as little as 24 hours, ensuring they have access to tomorrow’s cash flow today. This rapid access to funds helps businesses maintain smooth operations and seize growth opportunities without the stress of cash flow constraints. At OptiPay, we believe that healthy cash flow is the lifeblood of any successful business. Our commitment to helping businesses overcome financial hurdles and achieve their growth ambitions has solidified our reputation as a trusted partner in the business finance sector. Whether you are looking to stabilise your cash flow, expand your operations, or navigate financial challenges, OptiPay is here to support your journey with innovative and efficient financing solutions.
