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How Business Debt Can Strain Owner Mental Health

Owning a small business can be extremely rewarding, but also comes with a lot of stress. One of the biggest sources of stress for small business owners is debt. Taking on too much business debt or struggling to manage existing debt can take a major toll on a business owner’s mental health.

The Stress of Debt

According to a survey by the NSBA, over 50% of small business owners report that business debt causes them stress and anxiety[1]. Carrying high levels of debt creates constant pressure to make enough sales and revenue to make payments. Falling behind on payments can mean harassing phone calls, threats of legal action, and damage to your business’s credit.

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This level of financial stress can lead to depression, insomnia, and other mental health issues in business owners. In extreme cases, the thought of losing a business you’ve poured your life savings into has even driven some entrepreneurs to consider suicide[2].

Why Small Businesses Take On So Much Debt

There are a few key reasons why small business debt is so common:

  • Start Up Costs – Starting a business requires a lot of upfront capital to things like equipment, inventory, marketing etc. Many entrepreneurs turn to business loans or credit cards to fund these start up expenses.
  • Cash Flow Issues – Most small businesses go through periods where their income doesn’t align perfectly with expenses. Debt is used to smooth out cash shortages and keep the business afloat.
  • Opportunities for Growth – Business owners will often take on debt to fund an expansion or new opportunity, hoping it will lead to growth and higher profits down the road.
  • Lack of Capital – Unlike large corporations, small businesses can’t just issue bonds or sell public shares when they need an influx of cash. Debt is often the only way for them to access capital.

Signs Debt is Hurting Your Mental Health

While taking on some debt is often necessary to run a business, too much debt can quickly spiral out of control. Here are some signs that business debt may be straining your mental health:

  • You constantly feel anxious, stressed or depressed
  • You aren’t sleeping well and wake up with dread about the day
  • Debt is all you think and talk about
  • You’ve lost confidence in your abilities and decision making
  • You’ve pulled away from friends and family to hide financial struggles
  • You frequently think about just giving up on the business

If you recognize several of these signs in yourself, it’s very likely that debt has become a toxic force, robbing you of joy and negatively impacting your wellbeing.

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Tips for Coping With Business Debt

If you’re struggling under the burden of too much small business debt, here are some tips that may help:

Seek Support

Don’t try to handle it all alone. Talk to a trusted friend or family member about what you’re going through. Consider seeing a therapist or financial counselor to help cope with stress[3]. Attend a Debtors Anonymous meeting to connect with others facing similar debt problems[4].

Take Action

Hiding from debt or ignoring calls from creditors often makes the situation worse. As difficult as it is, make a detailed budget, review all debts owed, and come up with a plan for addressing them. This could mean negotiating alternate payment arrangements, working with a debt relief agency, or in extreme cases, declaring bankruptcy or closing down the business. Taking control can help relieve some mental strain.

Make Self-Care a Priority

It’s impossible to cope effectively when you’re physically and emotionally depleted. Get regular exercise, eat healthy meals, pursue hobbies, get out in nature, practice mindfulness – anything that recharges you and puts the business out of mind temporarily. Self-care will give you breaks from constant worry and help you think clearly so you can make good decisions.

Limit Business Talk at Home

Try setting some rules to keep debt and cash flow conversations restricted to office hours only, and not dominate evening and weekend family time. Discuss limiting “shop talk” with your spouse and kids. Protect personal relationships from being overwhelmed by business debt stress.

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Get Help From Professionals

There are professionals who can help analyze the debt situation objectively and identify options that may provide relief. Sit down with an accountant to go over the books and determine what’s sustainable. Consult an attorney specializing in debt relief for advice on negotiating with creditors. Get input from a small business coach or financial advisor to prevent getting into unhealthy debt levels again in the future. Leaning on experts can ease the burden on owners.

While debt is an unfortunate necessity for most small business owners, too much debt can seriously undermine mental health and quality of life. By recognizing when business debt becomes toxic, and taking proactive steps to address the burden, entrepreneurs can avoid reaching the breaking point. There are always solutions, even in the direst situations. Seeking community support and professional financial guidance can help ease debt-induced depression and anxiety. With a plan in place, it’s possible to pay down debts over time, while also recovering some much needed mental balance and optimism.

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