When you’re under pressure, you might choose to ignore or avoid looming debt problems in your business. Here are more productive ways to tackle them.

There’s a myth that the unique and powerful ostrich deals with oncoming danger by burying its head in the sand. What it actually does is lie on the ground to camouflage itself, in particular laying its long neck along the ground. It hides in plain sight until the problem goes away (or doesn’t).

If you’ve fallen behind in loan repayments, it’s critical that you don’t emulate the ostrich, even thought that might be your first instinct. Instead, being proactive and transparent with your lender and other stakeholders is a wiser approach.  

According to Bronwyn Penhaligon, of Penhaligon Applied Psychology, it's critical to manage the natural anxiety that arises when your business runs into problems. 

“Quite often in cases of business strife we see the owner prioritising “being busy”, which makes them feel like they’re doing something about the issue, but they’re usually barely tinkering around the edges.”  

“Not taking any constructive action feeds the anxiety, which just gets worse. Actually doing something about the problem is what brings relief,” Bronwyn explains.      

The smartest thing to do is to call the lender and explain the situation. It can be daunting to take that step, particularly because we tend to project our worst fears on to it. 

“Understandably, people hate talking about their business having problems,” says Tim Morosoli, Head of Collections at Banjo Loans, who has over 35 years’ experience in this field.   

“The job of the lender’s Collections team is to make square pegs of debt fit round holes of payment.” 

“Lenders like Banjo are focused on solutions, not judgment. We take a realistic approach, aiming for something that the customer can achieve. There’s a suite of options, such as restructures, delayed payments, extended loan period and so on,” says Tim.   

Maintaining good repayment habits on business loans is crucial for the long-term success and financial health of any business. Open and honest communication also has strong benefits, such as:   

• maintaining trust - being honest about your financial situation helps preserve the trust and credibility you have with your stakeholders. They are more likely to support you through difficult times if they know you are transparent and committed to resolving issues.  
• avoiding legal consequences - concealing or ignoring financial problems can lead to legal complications. Being forthcoming about potential defaults may lead to a more manageable resolution that avoids costly legal actions.  

• reputation management - honesty in challenging times can also help protect your reputation within the business community. Your stakeholders will appreciate your integrity and your efforts to address financial difficulties responsibly.  
• strategic planning - acknowledging possible defaults allows you to plan strategically. You can explore options with your accountant or financial adviser to address the underlying issues causing financial strain. You might also seek the support of a mentor – many business organisations offer this. 

Having your own business can be difficult at times. To help endure those tough days, Bronwyn advocates keeping your vision in mind. And don’t be afraid to share your worries.         

“Talking to someone about it is important. Often it can be something as simple as a long walk and honest chat with a trusted friend or relative. Sometimes we build up problems in our heads to be more complicated than they actually are” says Bronwyn.   

“However, if you notice that you’re really struggling to focus and are quick to anger or frustration or wake up and feel a sense of doom every day, then reach out to someone like a counsellor for support.” 

The last word is from Tim Morosoli. “I can’t stress enough – pick up the phone and talk to the lender. The sooner you do it, the less stress it’s putting on you, and the faster a solution can be worked out. It’s more than likely there will be answers that you haven’t thought of.”   

“Most of all, the lender will be happy that you’re proactively discussing your financial challenges.”