Invoice Bazaar Blog

How can you keep your business venture debt-free?

By Invoice Bazaar | December 1, 2021

Starting a business and making it successful without incurring any debt is indeed a tricky proposition. That is because running a startup or a new business venture will call for a good amount of money to buy equipment and inventory, create basic facilities and requisite infrastructure, pay salaries and wages and regularly fund marketing and production efforts. As such, the business owner is likely to face perennial cash flow-related issues. Debts thus become part and parcel of the equation when building a new business. 

So, short-term or long-term loans become an inherent part of their financial strategy for most business owners. Hence, even for entrepreneurs who start small by bootstrapping, it may prove to be a daunting challenge to ensure their organization remains debt-free. To get rid of the existing debts, you would have to first accept that running and growing a debt-free business is absolutely possible and practical. Meanwhile, you can keep reducing your borrowed capital and other existing business debts with proper cash-flow planning and predictions.

The biggest challenge for a small business is to keep operating and growing until it breaks even. It is during this rush that most debts are incurred. So, one of the main strategies to go debt-free is to avoid haste and plan out a slower growth trajectory. Another strategy is to avoid applying for huge loans for big purchases by pre-planning it in a manner so that the amount of debt needed is minimum. Bootstrapping has lately become popular just because entrepreneurs wish to remain debt-free. 

To ensure the least amount of borrowings, you need to clearly understand your company’s finances and optimize the use of cash. At the same time, you will have to keep exploring ways to boost your cash inflows. To remain debt-free, you may even have to stop giving credit and implement a “cash-only” policy with your customers. A comprehensive cash flow management plan that rigidly sticks to a predetermined operations budget will also help you pay off your existing debts.