For home business owners, some may think they have enough money saved up to buy all of their business needs at the start. After they have exhausted those funds to begin their respective businesses, they may lean on credit cards to establish good business credit. Business is booming, credit is established, and all things are golden. However, when times get tough, savings deplete, sales decrease, expenses increase, the only other option to rely on to keep operations going may be business credit cards. Credit card debt can rise like the current COVID-19 cases. Debt becomes unbearable, stressful, and some home business owners begin to lose hope. Now they may be stuck wondering, “How can I get out of credit card debt?”
For home business owners struggling with debt, I have created six strategies that can be utilized to alleviate credit card debt.
1. Tech-Savvy Budgeting Tool
Home business owners can create an Excel sheet that has total income for the month as a start, then list all expenses or bills while including a miscellaneous line item and total the sum at the end to see where they can save at the end of each month. By doing this, they can see how much can be applied to credit card debt without digging a hole in their pockets. Furthermore, home business owners should consider the financial institutions where their businesses are housed. Financial institutions offer budgeting tools through their online banking suites, such as Debt Payoff. Electronic budgeting tools are an option many may prefer.
2. Dave Ramsey’s Baby Step 2: Debt Snowball Effect
The Debt Snowball method is used to pay off debt by making aggressive payments with the smallest loan balance first while making minimum payments on the larger balances regardless of interest rates, to pay off that loan. This method can be applied to credit card debt. This gives a person the motivation and momentum to pay off debt faster while feeling the success of paying off a loan. However, never pay aggressively on credit card debt if your monthly budget doesn’t allow it. You will only hurt your pockets and struggle in other areas.
3. Insurance and Miscellaneous Expenses
Home business owners can shop around insurance rates and other expenses every six months to see where they can save, so in the long run they have more room to pay off credit card debt. Additionally, they can take advantage of suppliers offering discounts on bulk items. The more ways you can save by buying at a discounted rate, the more you will be able to apply those savings towards credit card debt.
4. Debt Avalanche Method
The Debt Avalanche method is a way to pay off debt by making aggressive payments with the highest interest loan balance first, working your way down to the smallest interest rate. With this method, you won’t see results right away, but it will still be effective in the long run. I recommend shopping around for lower interest rates at other financial institutions before attempting this method. If you can refinance any of the bigger loans to get lower rates, it will create an opportunity to save money on those loans, and the money saved can be applied to your credit debt. Again, never pay aggressively on credit card debt if your monthly budget doesn’t allow it. You don’t want to continue to be in a tough spot for your business that can rollover into your personal finances.
5. Inside and Outside Resources
The best way not to get overloaded with credit card debt is to not use it as your only source for financing your home business. If possible, talk to family and friends that may be willing to invest into the business. This can be a stressful conversation to have, but it can also be more rewarding and is likely to be a much cheaper source of capital. Moreover, there are local organizations in your city or state that entrepreneurs can utilize as resources for funding and knowledge. Here in Orlando, Florida, Black Business Investment Fund (BBIF) is an excellent resource for micro-loans and small business financing. Their website is bbifflorida.com.
6. SCORE
Ever thought of looking for advice or tips from an experienced business owner who can mentor you? SCORE, a nonprofit organization, is dedicated to helping small businesses get off the ground, grow, and achieve their goals through education and mentorship. They provide access to experienced retired business executives that are great resources for connects, funding sources, and grant opportunities for small business owners. Their website is www.score.org. By simply expanding your funding options, you can reduce the need and risk of overloading your home business with credit card debt.
Always have at least $1000+ in reserves in a business savings account. The interest earned on your money, even if it’s a small amount, can continue to build that account to help with unforeseen circumstances regarding your home business. Think of managing your business accounts and debts like your personal accounts and debt. If you can save money and create your own ways of paying off personal debt, the same concepts can be applied to your business debt! Always look for ways of saving money. The options are endless!
