Today’s economy has changed a lot, and so does the nature of employment of people. Outsourcing and downsizing have become highly prevalent. People are becoming self-employed due to the scarcity of stable jobs. In case of self-employment, individuals have a high scope of success and complete freedom. On the other hand, being self-employed has its own set of challenges, especially managing the business debt.
Financial tips for avoiding the accumulation of business debts
There are some common mistakes that people in business do, which lead them to the accumulation of reductive debts.
- Many people in business do not understand that adequate capital is necessary to start a business. Starting a company with the bare minimum amount you have in hand is quite easy, but it is essential to realize that in the long run sufficient cash reserve will become crucial. A business cannot provide with adequate profit in the first month itself, and so you will need to have sufficient fund to last during those periods of crisis.
- Again, people in business fail to understand that they need to keep some money aside every year to cover HST income taxes and CPP contribution. Self-employed people are sometimes not aware of the various tax obligations. They use the bare minimum profit amount collected in the initial years to spend for their daily living expenses. This is completely wrong because if you hope to improve the situation of your business after few days and then start with the savings for meeting the tax amounts, then it will lead to significant bad debts. Even before you take something from your business for your own expenses, it is essential that you put some money aside to ensure that the business keeps rolling.
Make sure that to create a comprehensive business plan, which includes how to deal with the payments during the non-profit months.
- Keeping a certain amount of money for the living cost and startup cost is essential
- Before you start with the business plan, make sure that you develop a perfect projection for good cash flow.
Tax debt is common for self-employed people – why?
You have heard several times that being self-employed is not easy because it leads to a number of responsibilities. Tax debt is something which is commonly faced by self-employed individuals. During our service tenure, a portion of the income is deducted by the employer to redeem the government on your behalf. This is known as income tax. Several other tax obligations are also covered up by the total amount deducted from your income. But as a self-employed individual, you need to make these payments in installments. You can even collect HST and use the same for your business and personal expenses only to find yourself in debt at the end of the year.
What can you do if you have compiled taxes for several years?
It is always better to clear off the debt amount, and it’s also the same in case of tax debt. If you have enough money in the bank, then you can go ahead and pay immediately before the amount compiles any further. On the other hand, if you have a shortage of money, then you can go for negotiation and pay using a post-dated cheque. It is not always possible to get an extension on the tax debt, but still, you can do the negotiation according to the situation.
Consumer proposal or any other formal proposal is required for payment plans which are due for more than two years. After you file the tax returns, if the reason is considerable then you can expect a positive response.
As a businessperson, it is also necessary that you will always have to be aware of all the tax obligations and sections stated in the jurisdiction. So, it is advisable that you hire the service of a professional who can advise you regarding taxes. As a self-employed person, you will always have to ensure that you clear off your taxes without compiling them further. Balancing the books of account is also essential and if you cannot manage to do that on your own due to certain reasons, then do not hesitate to go ahead for professional assistance. If you already owe debt taxes, then it is better to get in touch with a licensed insolvency trustee.
How can debt consolidation loan help you?
Debt consolidation is known for being a public process where an individual takes a loan to clear off the debt burden. This can help you to manage the several debts which you have in the market. For instance, if you have credit card bills, personal loans, student loans, outstanding EMI, etc., debt consolidation loan can combine all of them into one single loan. This helps you while making the payment every month and you can also understand the exact amount that is outstanding. You can check out Nationaldebtrelief.com to get consolidation loans.
Types of debt consolidation loans available
Basically, debt consolidation loan can be borrowed through unsecured and secured loans. If you do not have any collateral to put forward, then unsecured loans can be your only choice. You need to check with multiple banks and commercial lenders before finally choosing the one from whom you shall take the loan.
Various offers and schemes are also available on unsecured consolidation loans where you can pay a low rate of interest or even no interest at all for the first few months. On the other hand, secured consolidation loans are easily available where you need to keep any tangible asset as collateral security. You can even get a loan against equity, mortgage loan, insurance policy gold, cash value, etc. In case, you fail to repay back the borrowed amount to the lender; the collateral will be sold to retrieve the amount paid to you.
Eligibility factors for getting consolidation loans
The basic criteria for debt consolidation loan need to be met, and we are enlisting them below for your convenience:
- The age bracket of the borrower should be between 21 to 60 years
- The applicant needs to stay in the city for at least one year
- Two years of work experience is essential
- Documents need to be submitted, which include address proof, bank statements, identity proof and salary slip, etc.
- The minimum salary of the applicant should be at least 15000 rupees per month or more. The salary bracket basically depends on the city where you reside.
Before approaching a debt consolidation organization, it is better to gain as much information as you can so that it will help you to understand their terms and conditions easily as well as the offers and schemes they have for you.