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Business debt – How do you incur it and how to get out of it? by Shawn Ambrose

09 Jan Posted by in Business | 1 comment

We’d like to thank Shawn Ambrose for today’s guest post.

Business debt is a common phenomenon, especially for those who have started out on their small business. One of the first things that you need to do before starting a small business is deciding what kind of financing you are going to use for your business. Debt financing is one of the most popular and easy way of financing your business. Debt financing is basically when you take out a loan from a bank or any other standard financial institution in order to pay for your business. The drawback of this process is that you will have business debt on your account. However, if you know how to reduce the other costs of your business so that you can accumulate enough money from your profits you can pay back your business debt as fast as possible and be debt free once again.

What are the kinds of debt financing you can get?

Debt financing has its own subtypes also.

  • Short term loan -You can take out short-term loans which you need to repay along with the interest payments within a particular period of time which is not too long. This period usually ranges from 150 to 180 days. These are also called demand loans at times as they can be called in by the lender, which is a bank or a credit union at any point of time.

  • Long term loan -You also have the option of taking out a long term business loan for your small business financing. These loans are known as term loans and are used to finance particular assets like renovation of buildings or capital equipment.

 

How can you get out of your business debt?

One of the best ways of getting out of your business debt is reducing the cost of your business and gathering enough profits so that you can pay back the initial finances that you had borrowed. This is not too difficult as your business starts settling down. Initially you have to conduct all your business activities with money borrowed from buying things from your vendors to paying your suppliers. But once your business starts working and the profits start streaming in, it is easier to pay from these profits. You should remember not to extend products on credit to your customers during the initial phase of your business. At such times you would need all the capital that you can muster and selling products on credit will do no good to your business. you should also keep in mind to reduce the cost of your business by cutting out unnecessary expenses.

Thus you can see business debt is customary if you have to start a small business, however you can get out of it by following proper financial practices. To know more on debt, feel free to visit : http://twitter.com/debtcc

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  1. kelly01-09-12

    Thanks Shawn for the tips on business financing! We can use all the financial help we can get these days! Thanks for sharing.

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