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5 Simple Ways to Stay Out of Debt

5 Simple Ways to Stay Out of Debt

 

For a startup  business owners, one of the easiest ways to inject cash to their  projects or get the working capital to set their plans is motion is  applying for a business loan; whether taking out this loan from a  lending company or applying for a federal grants through the different  loan programs offered by the U.S. Small Business Administration.  The  true fact is that borrowing money is not always a good idea, because  interest rates may increase dramatically the debt of the business,  making it lose competitiveness by itself, while getting business owners  trapped in a debt cycle that it is hard to break down.

Avoid Debt by Staying Away

It is easier to say stay away from business debt than actually doing  it. However, if you are a business owner you cannot build a good  business reputation, credibility, and competitiveness if you are  financing your business with borrowed money. Both startup businesses and  long-time established businesses may need a cash injection sometime,  but taking out business loans is definitely not the best option you can  look at.

Finding an Angel Investor

Nowadays it is easer to get someone investing in your business, hence  the reason why “angel investor” is actually a commonly heard term to  name those individuals who are willing to invest their money in a  business venture. Yesteryear, they were usually referred to as “business  partners” or “investors,” although however, you name them it makes no  difference. You can avoid debt by finding an angel investor to fund your  business projects.

Adjust Your Financing Planning

When your business seems to run out of money very often and your  reporting earnings seems far from contributing to keep your projects  running, it could be time to review your financing planning. Sometimes  it is possible to keep the business up for another whole month or so  before having to borrow money, but this is only possible when you review  your business finances and make the necessary adjustments in the  business budget.

Work Over Your EBITDA EBITDA stands for Earnings Before Interest, Taxes, Depreciation and  Amortization, which are expenses that have to be subtracted from a  business gross income, but that often is a factor that business owners  do not take into account, particular new business owners.  A common  scenario on this matter is when you are certain to get all the money  needed to get your business working efficiently, but you end up  realizing that there is not as much money as you thought. When this  happens, it might not be due to a poor financing planning, but to the  fact of making your projections without considering EBITDA.

Making More Money

Sometimes you know that the solution to avoid debt is making more  money, but you have not found the way to make your business generate  more revenue. Even though, it is all about a careful marketing review.  Find a way to attract more clients and convert their visits into sales.  An effective marketing campaign can bring the resources that you need to  stay out of debt, and it can also be the clue to make your business  grow.

Published by Stevie Clapton

Stevie Clapton provides financial advise through multiple sources where you can find more frugal content.

1 Comment

  1. Peter Mutiso · February 11, 2013

    I like your mindset, but sometimes is impossible to stay out of debt
    Peter Mutiso recently posted…Small Business Ideas In IndiaMy Profile

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