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How do I prioritize multiple business debts for relief or repayment?

How Do I Prioritize Multiple Business Debts for Relief or Repayment?

As a business owner, you may find yourself struggling under the weight of multiple debts—and wondering how to dig your way out. It’s stressful, I get it. But take a deep breath. There are strategies that can help you prioritize which debts to pay off first, negotiate relief, and resume steady repayment plans.

First Things First: Take Stock of Your Debts

Before making any big moves, you need a clear picture of what you owe. Make a list of all outstanding business debts, including:

  • Business loans – The Small Business Administration has COVID relief options worth checking out.
  • Business credit cards – Ask issuers about hardship programs or temporary lower rates.
  • Equipment financing – Look into sale-leaseback arrangements if you own equipment.
  • Accounts payable – Talk to vendors about extending terms or discounts for early payment.
  • Payroll taxes – The IRS offers installment plans and other options.
  • Commercial rent – Ask your landlord about deferrals or abatements until business picks up.

Rank Your Debts by Importance

Not all debts are created equal when it comes to consequences. Generally, prioritize debts that threaten your business operations first:

  • Payroll. Without employees, you have no business. Stay current on payroll taxes and wages.
  • Rent. Get evicted and you lose your space. Keep the landlord relationship solid.
  • Essential utilities. Electricity, gas, water—can’t run a business without them.
  • Equipment loans. Default and you risk repossession of items you need.
  • Inventory financing. Miss payments and inventory sources dry up.

Lower priority but still vital: credit cards, unsecured loans, accounts payable. Get relief or set up payment plans.

Know When Bankruptcy Makes Sense

If negotiations fail and lawsuits or judgments loom, bankruptcy may be an option. Chapter 7 liquidation stops collections and wipes out eligible debt. Chapter 11 reorganization lets you repay debt under court protection. Chapter 13 personal bankruptcy restructures personal debts. Consult a bankruptcy lawyer to discuss the pros and cons for your situation.

4 Strategies to Regain Financial Footing

Whatever debts you decide to prioritize, take action to get repayment back on track:

  1. Seek loan modifications. Lenders want to avoid defaults, so they may approve a lower payment plan.
  2. Refinance high-rate debt. If your credit allows, lower interest costs through consolidation loans.
  3. Explore government programs. Federal and state programs exist, like SBA loans or small business grants.
  4. Cut expenses. Review budgets for any waste you can eliminate to free up cash for debt repayment.

Stay Hopeful – You Can Do This

I know paying off business debts seems daunting right now. But take it step by step. Create a plan, prioritize intelligently, negotiate with creditors, and lean on resources like bankers, lawyers, and accountants. Bit by bit, you can get your finances back on track and put your business on solid ground again. It may take time and diligent effort, but you’ve got this. Here’s to brighter days ahead!

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