Nobody enters the world of self-employment with anything more than an optimistic, hopeful outlook. The problem is that things don’t always go quite as rosy

With nine out of ten start-ups folding within the first two years, falling into financial issues is a sadly common problem for those pursuing entrepreneurship, and bankruptcy is a possibility for many. Yet no matter how much debt you fall into, there is often a way of getting out of it without having to declare yourself bankrupt.

Here are a number of options open to you, covering everything from small shortfalls to more sizeable debts.

Credit card

They may not be a viable option for major financial issues or those with a poor credit history, yet for smaller problems they can offer some breathing space in the short term.

Before applying for a credit card, go through the details your lenders will be evaluating and assess your likelihood of being accepted. These include the accuracy of your credit report; whether your name is on the electoral roll; and how stable your income and general livelihood has been in previous years, among other factors.

If you get rejected, keep shopping around as there are companies that accept those with poor credit scores, although the interest rates will likely be even higher.

Overdrafts

Again, far from a long-term solution, overdrafts can provide some quick relief while you’re looking towards other options. Authorised overdrafts can be organised with your bank, whereby you agree the monthly charge for using them in advance. However, factor the fees into your monthly outgoings in case you go over the limit.

Unsecured loans

Unsecured loans otherwise known as personal or signature loans, the difference between these and secured loans is that, in this case, the lender has no claim over your financial assets if you don’t meet their repayment schedule.

They’re widely available and often quite flexible when it comes to the amount loaned and the terms attached to it. But a poor credit rating can make getting approval a lot harder, and the APRs attached are often higher than for other secured options.

Consolidate debts

Consolidating debts into single monthly payments can not only simplify the process of paying them back – and give you a single date each month to save up for – but they can also give you the opportunity to reduce your interest rates.

A reputable credit counsellor should be able to help you qualify for a consolidation loan. While they’re at it, ask them for help in setting up a debt management programme and finding ways of reducing business expenses.

Debt settlement

Ultimately, your creditors will want to get something out of you rather than nothing, so if you ever get to the stage where your debt massively outweighs your income, it might be time to look towards a debt settlement option.

This will involve negotiating your balance to try and get it reduced. When approaching this, make sure to focus on debts that have been sent to collection.