You will be surprised to know that all the principles and fundamentals of personal finance apply equally for dealing with business debt as well. Therefore, just the way you saved money, planned a budget and paid off your credit card debt, you can do the same to stay out of any business debt and run a business debt free. You may come across people who believe in the myth that any small business must have some amount of debt. You would be argued that you cannot make any large purchase without debt neither you can upgrade your computer and machinery or even make the payroll without debt, which is simply a misconception.
The Risk Increases
Any debt was taken, for business or personal use, you become a slave to the lender which dramatically increases the risk as many businessmen have lost their business to their creditors as they could not make their payment on time. On the contrary, a business that has no debt at all not only survives, but it also prospers as well. When you have a struggling competitor, the chances are that you can make deals for pennies on the dollar by using your available money to grow. Apart from that when a decision is taken in debt, then any mistake of the business process or policy is also magnified. The survival of your company is at risk and failure may mean years of payments.
Overcome The Myths
Many may tell you that you have to borrow a large amount of money to start a business, but if you have a strategic plan to deal with the fluctuating cash flow, you can even run a business successfully starting with less than $5000. You do note even have to use your credit card to purchase or travel and to keep track of your expenses. You can do the same with your debit card which would also limit your expenses and also not charge 18% interest.
To Make Large Purchases
There are four ways to make large purchases without falling into the debt trap. You can always rent a space to start your office. When you weigh the pros and cons of renting and buying you would know the benefits that you would enjoy. Outsource those processes which are not in need so that you can keep the cost of production at the minimum. You can buy used equipment and furniture initially to start with to keep your overhead cost low. And lastly, you should save in whatever way possible so that you can pay cash most of the time, limiting your expense limit.
Use Profits For Debt Reduction
Well, after all, these you may have taken a small debt to start your business and it is not a sin. But it would be a sin if you do not start paying it off immediately to become debt free. Allocate a portion of your monthly profit for debt payment and reduction. While you do so, also make a plan to meet any upcoming big expenses with cash, and you do not have to take credit card debt help at all.