Small business debt eats away at your profits, so it makes sense to pay down your credit cards, loans, and other debts as quickly as possible. The snowball method is an effective way to decrease your debts faster than making just the minimum payments. While often used to pay off personal debts quickly, the snowball method works just as well for business debts. How does the debt snowball method work? You start with the business debt with the smallest balance and put all extra money available toward that bill each month instead of just paying the minimum due. Say you comb through your budget and find an extra $250 per month. Add that $250 to the minimum payment to get that small balance paid quickly. Continue paying just the minimum amount due on all other debts while you aggressively pay down the smallest debt. Once you tackle the debt with the lowest balance, move up to the debt with the next smallest balance. Apply the total amount going toward the recently paid off debt to that minimum payment on that debt. Continue shifting the total amount to the new lowest balance as you pay off debts. This creates a snowball effect with the amount you pay growing significantly as you roll up. Why focus on the smallest balance first instead of the debt with the highest interest rate? When you focus aggressively on the lowest balance, you pay that debt off quickly. It seems more attainable to pay off a debt of $1,500 than it does a debt of $20,000. The faster you pay off that lowest balance, the sooner you can roll that payment onto the next debt. Your snowball grows much faster as you knock off the low balance debts. By the time you get to the largest debts, you have a large chunk of money going toward the payment each month. You shave off time on your repayment period and feel a sense of accomplishment. Don’t let small business debt linger. Get your snowball started today to enjoy more freedom and greater profits by eliminating debt.
Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.