3 ways small businesses can protect themselves financially

Starting a business requires a significant investment, and in order to protect your investment, it is crucial to have the right plans in place to protect yourself from any potential financial risks. Taking out debt is a normal part of doing business; however, life is unpredictable, and it can become harder to make your payments. Here are 3 ways to mitigate your debt and protect your business finically:

• Review your expenses and cut out unnecessary expenditure: one of the most effective ways to reduce debt and improve cash flow for your business involves reducing your expenses. As your business grows, you may find that certain expenses can be eliminated altogether or reduced. When deciding which expenses need to be cut, be honest with yourself about the necessity of certain expenses, and don’t cut expenses just for the sake of it because that may negatively impact your business. For example, how much would save from going paperless, or can you get discounts from your suppliers if you purchase certain supplies in bulk? Those are reasonable ways to cut expenses versus something like cutting costs on security for your business.
• Consolidate your business debt: if you have multiple loans, you may want to consider merging all of your business debt into 1 loan. Debt consolidation makes managing your debt a bit easier as you only have to worry about 1 repayment. You may also be able to secure a lower interest rate on your consolidated debt (though this is not guaranteed), as well as free up more cash for your day-to-day operations. While getting a debt consolidation loan may be good to help you manage your debt, you need to remember that you would be signing up for a new term loan which comes with an extended repayment period, so make sure you are aware of all the terms and conditions that come with this new commitment.
• Insure your business loans: a loan comes with the responsibility of paying it off in monthly instalments, and in the event that you can no longer make payments, your loan goes into default. This could result in your assets being at risk of being sold so that the lender can collect their money, and your credit score will also be affected and likely affect your ability to qualify for loans in the future. However, this can all be avoided by insuring your business loans. A loan protection plan allows you to insure your outstanding balance in the event that you are unable to make repayments due to any issues with cash flow. This will make your financial recovery a bit easier as you will be able to prioritise other expenses, and your assets and collateral will be safe because your payments will still be up to date. A Standard Bank Owner Loan Protection Plan will settle your outstanding balance in full in the event of death, dread disease or permanent disability, and your premiums decrease every month as the balance of what you owe decreases.

A solid debt mitigation strategy will ensure that your business survives the tough times and keeps growing to greater heights.

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