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Is your company in debt? Here's the one thing you mustn't do to try and fix it

by , 24 April 2014
Debt is a big problem for any business and getting out of it is hard. Desperation may even drive you to take drastic measures. Some of these may work but there is one that you should never do. Avoid making the problem worse by finding out what this one no-go tactic is.

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Three accounting record risk areas to watch out for
 
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The single worst way to try get out of debt
 
Debt can be difficult for any business, especially when you still have to pay the normal running cost. You have to spread your money way too thin with multiple debt collectors all wanting their money back. 
 
This is a situation that could drive you to take drastic measure. You may even think about taking out a business loan. Well DON'T!

This is the one thing that you should never do to try get yourself out of debt. The reason for this is because a general loan is structured to have high interest. This means you may have only one creditor to pay off, but that interest rate may be worse than all the others put together.
 
So what's the solution then?
 
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How to save on auditors' fees and:
 
Maintain your cash flow;
 
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The better solution to fixing your debt
 
Now just because you mustn't take out a general business loan, doesn't mean that consolidation loans can't help.
 
As we've explained here, Loan consolidation is designed to give you one person to pay off with a lower interest rate. The place the loan comes for, normally the bank, will deal and negotiate with your creditors as well. This means that they may even be able to get lower interest for the primary debt. 
 
You should also negotiate with the bank to get the lowest interest rate possible. The bank will be more willing to lower the interest on a consolidation loan than a normal business loan. 
 
The Practical Accountancy Loose Leaf advises that if you're still operating while paying off this loan, you should reorganise your finances. This will help have the money to cover the payments for this single loan each month.
 
So if you're in debt remember, loan consolidation is a good idea but a normal business loan isn't. 
 

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