Manage Debt Effectively

Amid this volatile economic climate, small business owners may be facing a number of challenges, such as holding too much inventory or sluggish receivables, which can send a business's cash flow into the red. 

By identifying the areas where you can reduce costs and increase revenue, you can begin managing debt more efficiently and revive your business's cash flow.

Use these tips to help manage your business debt:

• Review interest rates. If the interest rate on your small-business loan is significantly higher than current rates, consider refinancing to obtain a loan with lower monthly payments. Before meeting with a lender, review your credit report to make sure there are no blemishes. A higher credit score is an indication of successful financial management.  
• Negotiate with suppliers. Don't hesitate to ask suppliers for discounts, especially if you order in bulk. Draw on your good payment history or on quotes from other suppliers when negotiating flexible or extended payment terms with suppliers.  Consider partnering with other small-business owners to make bulk purchases at lower prices. 
• Rethink space. If you are not using all of your square footage, consider subleasing unused space. If you can downsize on space to lower your rent, you may want to ask your banker if he or she knows of clients who are seeking to rent additional space.
  
  

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These tips could help increase revenue:

• Stay connected with customers. Use social media to get customer feedback about your products or services. Answer questions customers may have about your business offerings and inquire whether there are any related products or services you could offer. Seek suggestions about ways you can improve your business.  
• Increase exposure. During these tough times, increasing your marketing and/or public relations efforts in creative ways could pay off. These may include creating a website if you do not already have one, developing relationships with your local media or joining organizations to enhance your networking and help increase your business exposure in the community. Take advantage of social marketing resources, which can provide small-business owners a great opportunity to network and increase exposure for their products or services.
  
  Social networking sites--such as Facebook and Twitter--can provide a mechanism for reaching many potential customers through groups that may be interested in your offerings and expertise. Professional sites such as LinkedIn can also provide business networking opportunities as well as a platform for answering questions. 
• Meet with your banker. Your banker can be a great resource for ideas to help your business. Don't hesitate to familiarize your banker with your line of business and discuss your ideas and your financial goals or concerns with him. Once your banker becomes familiar with your business and industry, he can facilitate introductions to vendors, suppliers or other contacts that may complement your business. These introductions are especially helpful during tough economic times when businesses may seek to pool resources.

Managing debt is integral to sustaining your business's cash flow. Reducing expenses and increasing revenue can help manage your business debt. Consider consulting a certified public accountant or a trusted financial advisor for additional advice about managing debt.

Joseph Benoit is the small business banking executive for Union Bank, N.A. Visit www.unionbank.com for more information.