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7 Steps to Eliminate Small Business Debt

Running a small business can be extremely rewarding, but it also comes with its fair share of challenges. One of the biggest struggles for many small business owners is managing debt. While some debt is normal or even necessary in the early stages of business growth, too much debt can put your entire company at risk.

If you feel like your business debt is starting to spiral out of control, don’t panic. There are steps you can take to get back on track. Here are 7 proven strategies to help you eliminate small business debt:

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1. Review and Tweak Your Budget

The first step is to take a close look at your current budget. Where is your money going each month? Are there any unnecessary expenses you can cut back on? Even small changes like reducing utility bills or eliminating unused software subscriptions can make a dent.

You may also need to make difficult decisions like laying off staff or delaying expansion plans. The goal is to free up as much cash flow as possible to put toward paying off debt.

Don’t forget to look for ways to increase revenue as well. Even a modest boost in sales can make a difference. You may need to temporarily shift focus from long-term growth plans to stabilizing cash flow issues.

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2. Reduce Expenses

In addition to boosting revenue, you also need to look for opportunities to reduce expenses. Go through your budget category by category and figure out where you can cut back on spending. For example:

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  • Renegotiate contracts with vendors and suppliers to get better rates
  • Delay any non-essential purchases like new equipment or renovations
  • Ask landlords about temporarily reducing or deferring rent payments
  • Cut back on discretionary categories like office perks, travel, or marketing

Depending on your situation, you may need to make more drastic cuts like laying off employees, eliminating bonuses, or even closing down parts of your business. While painful, this type of downsizing can help you stop the debt from accumulating further.

3. Temporarily Use Cash

Once you’ve trimmed expenses, consider switching from credit to cash for purchases whenever possible. Only buy what you can afford with the cash you have on hand. This will keep you from racking up even more high-interest debt on credit cards or lines of credit.

Paying with cash also forces you to carefully consider each purchase rather than mindlessly swiping a card. Get in the habit of asking yourself if each purchase is absolutely necessary right now or if you can hold off until your cash flow improves.

4. Communicate with Lenders

Don’t stick your head in the sand and ignore calls from creditors or lenders. Communication is key when you’re having trouble making payments. Most lenders are willing to work with small business owners who proactively reach out for help.

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See if you can negotiate modified payment plans, extended due dates, lower interest rates, or other flexible options. Be honest about your financial situation and have a plan for how you intend to pay off the debt going forward.

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If you have multiple loans or creditors, talk to them separately instead of telling everyone you need reduced payments. Lenders will be more flexible if they think other creditors are still receiving full payments.

5. Explore Debt Consolidation

If you have high-interest debt scattered across multiple credit cards and loans, debt consolidation can be a smart move. This involves taking out a new lower-interest loan to pay off your existing debts.

You’ll be left with just one monthly payment on the consolidation loan, often with a lower interest rate. This can make payments more affordable and help you pay off debt faster. Banks, credit unions, and online lenders all offer debt consolidation loans.

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Just be cautious of shady lenders charging very high fees. Only work with reputable providers and read all terms carefully so you understand the total costs.

6. Seek Expert Advice

Don’t be afraid to seek guidance from financial experts like accountants, consultants, or attorneys. An outside professional can look at your full situation objectively and suggest solutions you may have overlooked.

Look for professionals who specialize in helping small businesses in financial distress. Make sure to understand what services they offer and what their fees will be before moving forward.

The right advisor can help you negotiate with lenders, create a realistic budget, identify new revenue opportunities, and determine if bankruptcy or restructuring makes sense.

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7. Consider Bankruptcy

While bankruptcy should always be a last resort, it is an option if your business has no way to pay back mounting debts. Filing for bankruptcy stops collections and foreclosures and wipes out many types of debt.

Chapter 7 bankruptcy liquidates the company while Chapter 11 involves restructuring debts under court supervision. Meet with a qualified bankruptcy attorney to discuss the pros and cons for your specific situation.

With the right steps and professional help, you can get your small business back on solid financial ground. Don’t wait – have an open and honest conversation with your lenders right away. Then start implementing changes to control spending, boost revenue, and pay off debt. You worked hard to build your business – don’t let debt destroy it.


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