Debt Consolidation: A Path to Giving Your Customers Better Service
If your small business is struggling under a mountain of debt, you might try seeking out a debt consolidation loan. Doing so could give you some breathing room going forward and allow you to provide better service to your customers right now.
Companies with Debt Can’t Be Very Customer-Centric
When your business is in debt, it can be difficult to have the funds you need to take care of your existing customers. For example, say your business is a managed service provider (MSP), and you want to obtain new clients on a regular basis. Well, if your MSP is in debt for a number of loans, then you have to charge a consultation fee—just so you’ll have the funds you need to promote your business to new customers.
This vicious cycle puts everyone in a bind: your existing customers, your new customers, and you.
Clients will notice that you’re charging for all the little things, and they will hesitate to trust your service. It’s awfully miserly to continually charge for minutiae. This sends a message that you’re likely to “nickel and dime” them to death.
It also sends a message that your business isn’t doing so well. If you’ve got any social sense or any public relations skill, you’ll know it’s best to give customers and clients a “pass” on certain expenses. Like, for example, the aforementioned consultation fee.
When you owe a lot of money to your creditors, you’ll likely charge for everything. If you charge more than you strictly have to, a bevy of other resource-related constraints will both directly and subtly communicate your lack of experience to your customers.
Now, if your business doesn’t have any debt, this isn’t a problem. But when you must charge for everything, it sends a message to your clients that your company is new and inexperienced. And they are bound to notice that your competitors’ prices are lower than yours. They might even suspect you of using them to secure a firm foundation for your business.
RELATED ARTICLE: 3 THINGS TO CONSIDER WHEN CHOOSING A LOAN FOR DEBT CONSOLIDATION
The Debt Consolidation Angle
The Catch-22 here is that without a substantial asset injection from the beginning, your business likely won’t obtain the forward momentum it needs to become profitable over time. That’s because virtually all new businesses struggle at the beginning.
However, there is a way to “have your cake and eat it too,” as the expression goes. What you want to do is find where your expenses for initial startup money lie. Then consolidate those expenses into a single recurring payment, and pay that off as quickly as you can. With most small- to medium-sized businesses, this won’t likely be a fast payoff.
You’re likely talking sums of around $300,000. You can’t just pay that back overnight—not unless your startup takes off like a rocket. So the idea is to get everything manageable, and for that you’re going to need the ability to choose from multiple options.
According to Consolidated Credit, a purveyor of consolidated credit counseling services reviews, “debt consolidation allows people to combine several debts into one. People who consolidate debt will not only make it more manageable, but they will also save money.”
With your business, you might try debt consolidation, as it’s not uncommon for startups to have multiple creditors.
Strategies to Stay Ahead of Your Debt
Quite often, loans and lines of credit have payback requirements that are several years in the future. For instance, a loan for $10k may not have a payback requirement until five years have elapsed, at which point interest accrues. Loans from solutions like the small business lending fund of the US will have many different qualifiers. It all depends on your credit going in. Obviously, the higher your credit score initially, the better loan options you’ll be eligible for.
Start paying off loans immediately, as you use them. Then, by the time interest begins to apply, you might very well have already paid them off. This strategy will allow you to continuing to functioning well as a business regardless of your financial situation.
Think of it like this. When your business is burdened by debt, it’s like running with weights. When the weight of debt is lifted, you can run so much more quickly.