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How Financial Advisors Can Help with Business Debt

Updated: Nov 8, 2023


How Financial Advisors Can Help with Business Debt

You might associate a financial advisor for business owners with services related to retirement plans, investment management, and estate planning. However, this professional possesses the expertise to help you deal with business debt. On the one hand, they can’t negotiate terms on your behalf or take on the application process for a debt consolidation loan, but they analyze your debt along with the terms that accompany your loans and contracts. From there, they help you to prioritize your debts based first, on their impact on your credit score and then by the amounts of interest rates–from highest to lowest.


This analysis arms you and your financial advisor with the information needed to determine how to pay off your debt and how to stabilize your financial standing. Keep reading to learn more about how a financial advisor can help you to keep your business afloat.


Debt restructuring



Debt restructuring


After careful examination of the types of debt and the amounts that a client is holding, financial advisors can then look at strategies for consolidating and restructuring the debts. In the case of a loan consolidation, you might already have a low credit score which can negatively affect the application process. Nonetheless, financial advisors can recommend creditors who can help in this area regardless of credit score. If you’re looking at restructuring your debts, on the other hand, a financial advisor can review your budget with you to determine how much you can actually afford to pay. This information might be useful if you have to negotiate for a lower rate with your creditors.


Budgeting assistance



Budgeting assistance


Once you have your debts consolidated or restructured, your financial advisor will review your monthly expenses and profits to see what you have to work with. First off, you and your advisor would look at your sources of revenue (depending on your industry), like subscription, usage, or brokerage fees that you charge to your clients, sales of assets, licensing (where you charge clients a fee for using your software or platform), or rentals. Of course, how much these sources bring in determines how much money you can work with. Likewise, a financial advisor can help you identify instances of overspending if you find that numbers point towards a negative cash flow. Consequently, you’ll explore ways to stop spending more than what you bring in. In the ideal situation of having a positive cash flow, your advisor can line out how much money goes toward paying down (or paying off) each debt. Ultimately, the goal is to have a visual list of earnings and expenses so that you can avoid getting further into debt and spending only when you can afford to.


Negotiating with creditors



Negotiating with creditors


Unfortunately, a financial advisor cannot negotiate with your creditors. They can advise you on what measures to take to refinance or consolidate, and they can assist with creating a long-term plan for managing your debt. However, they cannot communicate directly or negotiate terms with the lenders. You and/or an attorney would have to take on that task.


Cash flow management



Cash flow management


In addition to budgeting assistance, financial advisors also help business owners to gain a firm understanding of their cash flow necessities. By conducting a close analysis of the money that’s coming in, along with monthly expenses, your advisor can utilize those important factors to create a viable budget that enables you to plan more carefully for your long or short term financial goals.


Providing financial strategies



Providing financial strategies


Your financial advisor can also walk you through various options for investing, retirement planning, and avoiding debt in the future. By evaluating future financial needs, they can create a personalized set of investment strategies that grow your wealth while managing risk. From mutual funds to real estate investments, an advisor can offer you a clear road map for your long term financial goals. Additionally, if you’re planning on passing your business onto the next generation, a financial advisor can also help with estate planning.


Offering debt repayment plans and identifying and prioritizing near-term payments



Debt repayment plans


Even after restructuring and renegotiating your debt, you still need a solid plan for paying off your debt. And financial advisors serve well in identifying the loans that can be paid off more quickly than others. By prioritizing your payments according to your loans’ terms and amounts, your advisor can help you to firmly adhere to your budget and get your finances in proper order.


Evaluating business expenses



Evaluating business expenses


Likewise, a financial advisor for business owners can analyze and evaluate your business expenses. This service makes budgeting and financial planning easier since your advisor can help you to pinpoint the necessities that keep your business running and the expenses that are only draining your bank account.


Creating long-term debt management plans



Creating long-term debt management plans


Aside from gaining strategies for paying off debt, you can benefit from your advisor’s guidance with short term and long term planning. Such tactics may involve investing in various assets to diversify your income sources, creating a plan for paying your quarterly taxes to avoid IRS debt, and exploring ways to safeguard your money during catastrophic events. Basically, your advisor would not only put you on the right path toward paying off your debts, but also point you in the right direction for realizing your business financial goals.


FAQs

Why does a business require financial consultancy services?

This type of service proves to be vital to your business’s success because a consultant can help you find ways to decrease excessive spending while avoiding layoffs or downsizing. Through a close analysis of your cash flow and expenses, a consultant can offer financial advice based solely on your unique situation.

What are some of the best ways to adjust business debt?

How can financial coaching help with debt management?



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