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Debt Management in Business: How to Boost Your Business with Debts

Debt Management: How to use Debts to Grow Your Business

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In this article, I am going to be discussing Debt Management and How you can use Debt to Grow Your Business. Debt management in business is not really that hard if you really know what you are doing.

Debt is one sure way of scaling your business since no one is going to dash you free money.

Anyhow you get it aside from grants, either from angel investors, banks, or any form, as long as you’re paying back with interest, it’s called debt.

You must learn the right way to facilitate good debt and how to pay it back in due course

There is good and bad debt.

What Is Debt Management?

Debt management is measures taken to get your debt under control through financial planning and budgeting. Debt management is also a way of keeping up with your bills, especially if they have seemingly gotten out of control.
A debt management company is a firm that assists people to pay off their debts by consolidating debts into a single monthly payment, which is then shared amongst their creditors.
The main purpose of public debt management is to ensure that the individual, business, and government’s financing needs and its payment obligations are met at the lowest possible cost over the medium to long run, consistent with a prudent degree of risk.
Debt management plans and process assists in the reduction of outstanding, unsecured debts over time to help the debtor regain control of finances. The debt management process can secure a lower overall interest rate, longer repayment terms, or an overall reduction in the debt itself.
These types of debt management strategies can be implemented to accelerate wealth accumulation involving cash flow, repayment, and consolidation:
  • Advising on debt.
  • Control cash flow.
  • Effective use of cash reserves.
  • Debt consolidation.
  • Debt recycling.
  • Tax efficiency of investment loans.
  • Prepay interest.
The Benefits of a Debt Management Plan are as follows:
  • Simplify things by making just one payment.
  • Many creditors will be able to help you out with lower interest rates.
  • Fewer collection calls.
  • Eliminate fees.
  • Freedom from debt.
You can create a functional and effective debt management plan by;
  1. Prioritize Your Debts. Rearrange your debts in order of which one you’d like to tackle first.
  2. Focus on a Single Debt.
  3. Figure out your expenses.
  4. Go for the big wins.
  5. Go for the easy wins.
  6. Set up auto-pay.
  7. Make extra payments.
  8. See if you can move the payment due dates.
I am going to show you the practical steps to solve your debt problem
  1. Work out a budget and deal with priority debts.
  2. Consolidate or refinance loans.
  3. Get help with late-paying customers.
  4. Gain better control over your cash flow.
  5. Reduce unnecessary spending.
  6. Boost your revenue.
  7. Engage your staff and seek their input.

Debt Management in Business: How to use Debts to Grow Your Business

Hardly will you see any flourishing multimillion naira business without debt. But if you go about it the wrong way, you either die of depression or run away when completely overwhelmed with debts.

If you source a short-term loan for a long-duration project, it’s a bad debt because investors/creditors will drag your life like a faulty Tiger generator when you default.

If you get partners without spelled out terms and conditions that’ll save your head when plans go subway, you’ll forever have yourself to blame.

Humans are different, if you do a gentleman’s agreement, some people will understand and give you time, while some will opt out and demand their capital not caring how you’re gonna source it.

You need to know when to seek funds, not every unfavourable occurrence needs funding, sometimes what you need is just time, giving it more time, seating on the fence watching as everything unfolds.

At the earlier stage of your career, you’ll be tempted to have everything in place because you have that free cash flowing in from investors or partners.

This will land you in trouble as more cash will be injected into fixed assets that can’t be liquidated to roll out cash when you needed it

For example;

I set up a frozen food venture sometime in December 2020, in just 2wks of setting up even without testing the business fully, I already bought three chest freezers and some other tools I ended up not finding any use for it. I end up utilizing one freezer, the two others litter my house as I speak, I sold one recently cos rat 🐀 is about destroying it.

Don’t be tempted to buy everything you desire for your business because you have the fund for it, sometimes all you need is to improvise, improvise or rent it till you see you truly need it.

Also, I got a contract to help set up a 40acres plantain farm 3years ago.

I told the clients not to buy digging machines and some farm machinery until they were fully set up but they refused. They bought 2 brand new earth augers, automatic weeders, planters, and every other machinery.

When it was my turn to plant the suckers I rejected the earth augers because I don’t find the need for them, they bought the wrong specification, their land is too tough, it breaks down the machine intermittently, and we had to resort to manual planting, as I speak now, the machine is currently gathering dust in their store.

Almost every professional that works on their site rejected their machine because they didn’t wait properly to buy the right tools that suit their climate and type of soil.

Aside from that, they only need some machine once, the earth augers after planting are no longer useful, why buy when you can rent or improvise, whether you buy or not, planting fee is still the same, with or without your machine, I or any planter will plant suckers, so why the need to buy it?

I find it funny when a new company without traction is renting an office space in a big city, setting up and running costs stating into millions of naira.

What’s the need for it when you can easily get your customers free of charge on social media at the initial stage?

The people you’ll be dealing with mostly do not care about your fine office, many of them will not even be visiting as long as you can deliver.

I have a real estate company that I run in my bedroom, currently, the land I managed for people even at the freehold level is worth over N20m, yet I don’t find the need to have an office space at the moment.

I’ve learned all this I’m stating above in a very hard way, I’m still biting my fingers as I speak, I have colleagues who have gotten destroyed due to all I stated above, and some are even on the run as I speak.

Debt is a sure way to become wealthy but do it right because it also kills dreams and aspirations when it overwhelms you.

Don’t take a loan to start a business you have not tested before

When taking a loan to scale, take it one step at a time, don’t be in a rush. If you’re going through a tough time in your business, don’t take more loans, give it time, more time will phase it out, not more money, more money, more debts you’re accruing.

In your business, take loans to scale your business and place yourself in good debt and not in bad debt.

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