Securing a loan is one way to finance and recapitalise a business so that it gets back on its feet. Seemingly "dead" companies have been revived this way. However, the current situation in the county may not be too conducive for you to borrow and acquire credit from many financial institutions due to the high interest rates charged.
I have a personal inclination towards avoiding borrowing or acquiring extensive loans given the state of affairs. I have seen a lot of empires crumbling under debt while a lot of loans are being borrowed to settle other loans, which creates a vicious cycle. If you find yourself borrowing to service another debt, it is a sign that you need to change how you operate.
Debt the world over has been known to have adverse effects. One of the stories making headlines in Europe has been the debt crisis in Greece. What is peculiar about their debt crisis is the spiral effect it has had on other economies within the European Union.
Greece has had to make massive adjustments to try and dig itself out of the debt cycle that has been threatening to collapse the whole country. Such times require them to find solutions by taking a close introspection at the way they have been running their economy.
Such a precarious position requires a massive overhaul of the economy. Such a situation would demand an emergency bailout. Dealing with debt at a national level is never easy, equally so at company level. You must understand that debt issues can be solved, no matter how big they are.
Getting out of a debt may not be achieved easily or quickly but it can be done. Debts have levels some are accumulated over time while other are accumulated at one go. Regardless of how you achieve the debt, it is how you manage that debt, which prevents you from or getting into debt. If you find out that you can service your debt at a minimum level, then you are not yet in a debt crisis.
When dealing with debt you must be aware that no one intentionally gets into debt. You can spend money that you don't have resulting in you accumulating debts.
Before you make any adjustments, know that the first step you must make is to stop borrowing more. Some of the loans we accumulate with many financial institutions are because we are being over ambitious and being risk takers. Reduce your spending by all costs and maximise on your repayments. I believe the size of your debt does not really matter, what matters is your ability to repay in relation to the income you are getting.
You can have a $100 billion debt and still have the resources to pay back without any difficulty. The challenge really comes from the moment you spend more that you are getting. If your company is always in a deficit, sooner or later, it will show in your books and that empire will crumble.
If you discover that most of your money is going towards repayment of debt, you may also be in trouble.
The principal in debt management is that you must avoid borrowing to cover up a debt. Sometimes it may be less risky if you are offered very low interest rates.
You can liberate yourself though. The first step you must do is perform an audit of your current debt- where did it come from and what failures and mistakes have you done? You must also start budgeting; you can never get out of debt if you don't budget. Do the budget and stick to it.
Try to cut the cost of your debt as much as possible by using your savings. Interest paid on savings is cheaper than interest charged on borrowing.
More and more countries have had to deal with debt crisis. In Zimbabwe, it is becoming a rarity for a company to operate without some sort of a debt crisis. Some companies have recorded successes by communicating with their customers on the importance of paying earlier.
Discounts on early repayments are a way of encouraging customers to pay early. You must also find ways of increasing your income, if you have unused space, subletting may be an option.
Till next week, may God richly bless you!
