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Getting out of small business debt

Posted on December 14, 2017 by admin

Managing debt in your small business is essential in maintaining the financial health of your business as well as preventing bankruptcy.

Consider the following tips to ensure your small business debts do not spiral out of control:

Reshuffle or remove expenses
Reviewing your expenses is one of the first steps to take when tackling debt. Look at the costs you can cut out and find alternative solutions. Whether this means cancelling unnecessary subscriptions, getting rid of expensive systems or selling assets such as a company car. If you cannot completely cut out costs plan to delay them. For example, take the full amount of time to pay an invoice so you have some extra cash to pay for unexpected expenses.

Increase revenue
Consider incorporating low-cost marketing techniques to generate additional revenue. Create low-cost promotions, such as special discounts for loyal customers, coupons, limited-time sales or offering discount codes in your email marketing for subscribers. Look for opportunities for improvement within your business – there may be an underutilised area that could make more sales and needs heavier promotion.

Prioritise debts
Evaluate all of your debts and prioritise them according to the size of each debt and interest rates. Depending on the debt amount and what types of debt you have acquired, you could either choose to pay off the debt with the highest interest rate first or pay off the smallest debt first. Paying the smaller debts first may help psychologically as you may feel as though you are making progress. However, paying off debts with higher interest rates can help you save money on interest over the long run. Regardless of which option you choose, be sure to continue making the minimum repayments of all your debts.

Talk to creditors
Don’t be embarrassed to contact creditors to inform them of your situation. Letting your creditors know your financial situation may put you in a better position to negotiate payment terms and conditions. For instance, if you have debt through a bank you may be able to arrange a hardship plan or consolidate your loans into one single monthly payment and so on.

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Avoiding mortgage default

Posted on August 26, 2020 by admin

As individuals struggle with cash flow through the coronavirus, the Australian Bankers Association records that repayments on almost 500,000 mortgages have been deferred for six months. While repayments can be delayed, they cannot be avoided altogether.

Lenders can send you a default notice the day your repayment is overdue. However, they could also wait until your repayment is overdue by 90 or more days. When you receive a default notice, you are given 30 days to repay the amounts you have missed in addition to the regular repayment on your loan. Individuals who are struggling with their home loan repayments can avoid mortgage default by considering the following.

Contact your lender
Lenders are generally willing to work with you through financial hardship. Don’t be afraid to contact your lender to discuss your situation and find out what options are available for you. Lenders are often willing to negotiate short-term variations to repayment schedules that both parties can agree to. However, make sure that you do not agree to unrealistic repayment conditions that cannot be met.

Many Australian banks are offering a six-month deferral on mortgage repayments (including interest) for customers who are experiencing financial hardship as a result of COVID-19. If this is you, contact your bank to see if this is an option.

Apply for a hardship variation
Mortgage holders may be able to change the terms of their loan or temporarily pause or reduce their repayments under a hardship variation. A hardship variation can still be requested after you receive a mortgage default. To apply for one, contact your lender’s “hardship officer” and tell them that you wish to change your loan repayments due to financial hardship. This will usually require you to explain why you are struggling to make payments and to estimate how long your financial problems will continue to determine how much you can afford to repay.

After submitting a hardship variation request, your lender must contact you within 21 days with the outcome of your request. They may ask you for more details regarding your request; in this case, they must contact you again within 21 days from when you provide the additional information.

Consider selling your home
Selling your home is a tough decision, but in some cases this may be the better option if your circumstances are unlikely to improve. If you get to the point where your lender takes possession of your home and sells it, it’s likely that you won’t make as much as if you sold it yourself. When you sell your house on your own terms, chances are you will get a better price and avoid having to pay the legal fees passed on by your lender. Inform your lender if you decide to sell your home; they may ask for proof, such as a copy of the contract with your real estate agent or property advertisements.

Renting out your home until you can afford to make repayments again may also be an option if you are able to live somewhere else during this period.

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