The past two years have been the most difficult years most business leaders have ever faced. In order to stay operational, many companies had to take on additional debt or max out their credit lines and credit cards just to pay their bills and stay operational. And they may have had to repay part or all of the funds they received through economic assistance programs that were put in place to help small businesses.
With the start of a new year, many business leaders are finding themselves in a difficult position, and facing loan repayments that may even be crushing their business. Here are some things you can do to soften the impact of loan repayments:
Is Your Debt A Tax Write-Off?
Hopefully, the debt you took on at least had a positive impact on your company’s financial growth. That would be what I call “good debt.” Examples of this would be loans for things that made your business more efficient or profitable, and the amount returned in profit exceeded the borrowed amount. It is even better when you applied the borrowed money toward things you can write off against your taxes, thereby lowering your taxes.
A Tax Planner would help you ensure that you can write off as much as possible against your taxes. You would be well advised to look into how much of the debt you can write off. It may be higher than you think. We see overlooked write-offs frequently, and would be happy to take a look for you. And if reducing your tax bill is not feasible or not enough, there are two more ways I can recommend to address business debt that feels like it is crushing your business.
Two Other Ways To Handle Crushing Debt
Before I get into the two ways I do recommend, there is one thing I recommend you avoid: Do not try to avoid repayment or walk away. It will catch up to you, and your personal assets are not always as protected as you may believe they are. Bottom line, avoiding repayment is a really bad idea. Instead, you should try to renegotiate the terms of repayment. Debtors want to collect the entire amount, so they have an interest in making sure you can repay the loan without filing bankruptcy, which is the other option.
Whether you file bankruptcy or have to renegotiate the terms of repayment, your credit rating will take a hit. It’s important to remember that, and to do everything possible to repay the amounts owed on time and as agreed upon at the start of the loan. But if you need to defer, you might want to discuss the situation with us before you make the decision. We can help you with the negotiations, and it is also possible we might find a way to reduce your taxes. The money we free up could then be used to meet the original loan terms and avoid the credit rating hit altogether.