small-business debt

How to Manage Your Small-Business Debt with Greater Ease

Image Credit: Phil Gwinn on Flickr

Debt is not necessarily a bad thing. As a matter of fact, most business owners run their companies on small-business debt. Used properly, it can help you expand your small business by giving you the ability to add machinery, equipment, and new employees.

However, too much small-business debt can stifle cash flow. When that happens, it can put your business at risk. Besides, the less you owe, the more you have for reinvestment.

If you are in a situation of having a great deal of small-business debt, you might be considering declaring bankruptcy. However, bankruptcy comes at a cost. There are lawyers to pay and court filings to settle. Plus, it can damage your personal credit score as well as that of your business.

Nonetheless, if your company is crippled with small-business debt, there is hope for you. There are ways to manage your small-business debt without filing for bankruptcy. For example, you can seek debt help from Creditfix. Alternatively, employ some of the methods below. With commitment and dedication, you can soon get your small business up and running, without a cloud of small-business debt hanging over it.


1. Revisit Your Small Business Budget

Your budget must correlate with your business’s financial situation. In other words, if you keep piling on more debt instead of settling the ones you already have, then your current budget is out of balance.

Therefore, ensure that your revenue covers your fixed monthly costs before anything else. These are expenses such as utility bills and rent.


2. Cut Some Costs

Identify expenses in your business that you can cut. Doing so will help you to reduce costs and stop borrowing. For instance, you can sell unused machinery and equipment. Or you can sublease unused space. Get creative and look for more ways to bring in additional money. For example, can you relocate to a more affordable space?

If necessary, you could let some employees go. However, this should be your last option for getting your small business out of debt. Nevertheless, if this is what you must do to keep your business running, then you must make this difficult choice.


3. Boost Sales

Look for ways to boost your sales. That is, engage with clients, and respond to their queries and comments via your social media outlets and even offline. You can also reward loyal customers, encouraging them to purchase from you again and again.

Moreover, you can create a strategy for increasing your prices without losing customers. For example, try offering volume discounts on large orders. Use the proceeds to pay off some of your debt.



4. Negotiate with Creditors

Debts are difficult for a small business to pay down, especially if there are many debts. Therefore, negotiate with your creditors for a settlement plan.

Perhaps they will even agree to take you off their books. However, this generally only works for really large small-business debt that has languished for a long time, with no effective actions taken by either party.

For the most part, always stay in communication with your creditors, especially if you are experiencing a financial crisis. If you have a lot of creditors, consider outsourcing this task to a professional debt-relief firm. This can give you some relief from the stress.




5. Shorten Your Payment Terms for Customers

Small businesses generally cannot afford to offer long-term payment plans to their customers. If some of your customers do currently repay you on long-term agreements, go to those customers and be honest with them about your difficulties. Most people will understand and try to work with you. Try to reduce those agreements down to no longer than a 30-day repayment term. In this way, you will get your money earlier. This will help you to settle your own debts.

To sweeten the deal, especially for your most loyal customers, offer discounts for early payments. On the other hand, you can also penalize any late payments.


6. Chase down Late-Paying Customers

Now is the time to compile a list of all your customers whose debts to you are long-standing. Chase them down and do what you must to get them to pay you every penny they owe you. Then use the money you receive from them to settle some of your small-business debt.


7. Borrow from Friends and Family

Taking on a debt to repay another debt is usually not a good idea. However, if friends and family are willing to lend you money at no interest and with a reasonable repayment plan, this might be a way for you to go.

However, you should still keep things businesslike and professional. In other words, draw up a contract with repayment terms that are agreeable to both parties. Then, be absolutely certain that you keep your end of the bargain and repay your debt to your friend or family member.



Once you have your small-business debt under control, keep an accurate inventory of your debts. Make sure you always know your monthly payment amounts as well as the interest rates. In this way, you will know which debts require immediate attention. Many experts suggest paying off the debts with higher interest rates first.

Then, you won’t need to shy away from taking on small-business debt if your business requires it. Just remember to be wise about it, from taking it out in the first place to sticking with your repayment plan.