
Tips for Taking on Debt as a Subcontractor or Business Owner
Everyone knows that you have to spend money to make money, and no one understands this more than an independent business owner. With that said, it can still be daunting to take on debt after you’ve gotten your business started. Sometimes taking on some debt is necessary for making substantial moves for your business. There are a few things that are important to remember when taking on debt as a subcontractor or business owner:
Consider Your Loan Options
The quickest way to get into hot water with your business debts are to take on loans that you don’t really need. Explore all of your options — would a SBA-backed loan, an ABL loan, a Factor loan, revenue-based financing, or a microloan work best for you? Loans are not one size fits all, so it’s important to be sure that your loan is appropriately sized and tailored to your company’s needs.
Make Sure You’re Using Resources as Efficiently as Possible
How’s your allocation of resources? If you are going to take on debt, you’ll want to be sure that you are using your existing funds as wisely as possible and that you and your employees look for ways to be more efficient and reduce costs wherever possible. Being smart with your existing finances can free up funds so that you can get started paying off your debt as soon as possible.
Be Budget-Conscious
On a similar vein, take a look at big-picture budget lines. Is your budget aligned with your business goals? If it starts to feel as though debts are piling up, chances are your budget is not serving you well. Budget in your debt payments so that you can make more than just the minimum payment each month. This way, if you need to divert funds to another byline, you can still make the payment. And if not, your debts will go away sooner and accrue less interest if you make more than the minimum payment.
Prioritize Loans and Anticipate Problems
If making your monthly payments on multiple loans proves a difficult financial burden that is straining your budget, you may consider consolidating your loans to decrease the required monthly payment. Paying off your loans efficiently and understanding your debt situation are essential factors in returning to a debt-free state.
