how to get out of business debt

by Aidan Kang, CFA
Senior Writer
UPDATED: February 23, 2023

What Is Business Debt?

Money makes the world go round, and no one knows that better than a small business owner. While there is great potential for success, managing debt can quickly spin out of control if you don’t stay on top of it. If your small business has been bogged down by increasing debt, you may be feeling overwhelmed and discouraged. Never fear! We're here to show you how to get back on track with your finances and make sure your business stays afloat.

It doesn’t matter whether you have $100 or $10,000 in debt – taking control of it is essential if you want to keep your business alive and prosperous. There are steps that all businesses must take in order to pay off their debts without sacrificing long-term profitability. I'm gonna walk ya through exactly what those steps are so that you can get yourself out from under all that financial stress once and for all!

You won't find any gimmicks or quick fixes here; only sound advice backed up by years of experience and research. So stick around – because I'm about to teach ya everything ya need to know about climbing outta the red zone!

1. Reduce Your Business Costs

Unmanageable debt can be a catastrophic problem for small businesses. In fact, according to the U.S. Small Business Administration, around 82% of businesses that fail cite “inadequate cash flow or severe undercapitalization” as their primary cause of failure. It doesn't have to be this way though!

One proven solution is reducing business expenses and improving payment terms with accounts receivable. This could include negotiating better rates on supplies or services your business needs in order for operations to run smoothly.

You may also want to consider setting up automated payments so you don’t miss any deadlines and incur late fees which add up quickly over time. Additionally, streamlining billing processes will help ensure customers are paying regular invoices on time and eliminate unnecessary costs like extending credit without proper approval beforehand.

At the end of the day, it's important to take control of your finances when running a small business – being proactive with budgeting, cutting back where needed, and making sure all bills are paid in full each month will keep you out of the red!

2. Encourage Your Customers To Pay You Sooner

Here's how you can get your customers to pay sooner and help free up some breathing room when it comes to your small business debts.

First things first: learn all the tools available for collection agencies so you know what strategies are out there which may work best for you. Businesses can often use collection agencies as a way to ensure larger payments from their customers. This should be done with professionalism and respect – not aggression or threats. You want your customers to see themselves in good standing with you so they'll continue doing business with you down the road.

So why is this important? Well, getting money into your hands quicker means more working capital right away instead of waiting on those late payments to come through. Collecting payment sooner also helps build trust between yourself and your customer base while helping boost cash flow overall. All these aspects will contribute greatly towards getting your small business out of debt faster than before!

3. Boost Your Business Revenue

Let's talk about how to increase your cash flow and get out of business debt. The best way to do this is by leveraging what you already have – look for ways to maximize the value of your current offering. This could be something as simple as advertising more or expanding into a new market with an additional product line. Anything that can help increase revenue coming in should be considered.

It may seem counter-intuitive, but investing time and money in developing new products and services will actually help reduce your debt because it creates opportunities for more income streams. Plus, if you've got a great idea for a product or service, chances are customers will love it too! So don't shy away from taking risks – think outside the box when it comes to generating additional sources of income. Doing so could give you the financial boost needed to start paying down those debts quicker than ever before.

By actively seeking out ways to grow your profits, while also creating multiple sources of income, you're giving yourself the resources necessary to tackle those pesky debts and free up some much-needed cash flow along the way. Don't let debt stop you from reaching success – take control now and see just how far you can go!

4. Pay Off Your Business Debt In Order Of Priority

Tackling business debt can feel like a never-ending uphill battle, but if you develop the right strategy to combat it and stay committed to that plan, you will be able to get your small business back on its feet in no time. Creating a target debt or stack repayment plan is an essential step for any business owners looking to reduce their financial burden and improve their standing.

When crafting this plan, ensure that all of the debts with the highest rate hikes are at the top of your list so they can be paid off first. This approach allows you to save money while freeing up more cash flow for other expenses as quickly as possible.

In addition, make sure that you have proper budgeting and accounting measures in place going forward so that you don't find yourself in the same situation again down the line.

By setting realistic goals, sticking to them, and using every resource available to you along the way, even seemingly insurmountable amounts of debt can be successfully managed by savvy business owners who refuse to give up. So take control of your finances and create a target debt or stack payment plan that works best for both you and your small business.

5. Negotiate Better Terms With Your Creditors

When it comes to getting your small business out of debt, negotiating better terms with creditors can be like playing a game of chess. You need the right moves and strategies in order to come out on top! Luckily, there are steps you can take that will help improve your credit agreements and ultimately provide some much needed business debt relief.

First, assess how much debt your company has outstanding by looking at invoices and bills from each creditor. Once you know what kind of money is owed, contact each one directly so that you can discuss payment terms. Depending upon the size of the loan or amount due, many creditors may be willing to negotiate lower interest rates or extended repayment periods in exchange for personal guarantees or reduced payments over time. Whatever agreement you make should always be written down and signed – this way both parties have an understanding of the new arrangement.

TIP: When talking to creditors about renegotiating their loan terms, keep calm and try not to show any signs of desperation. Be professional and confident when discussing alternative arrangements – remember they want their money back just as much as you do! Additionally, having financial records readily available during negotiations could also help prove your case in favor of reducing debts more quickly than originally agreed upon.

6. Consider Consolidating Your Business Debt

Another strategy to consider is consolidating your business debt. Doing so can help you save time and energy by organizing all of the payments into one manageable bill.

Here are four tips for considering consolidation:

  1. Evaluate your financial situation – take a look at what kind of income you have coming in compared to how much money has to go out every month.
  2. Research different options – depending on where you stand financially, there may be multiple ways that can help consolidate your debts, such as applying for a loan or filing for bankruptcy.
  3. Talk with an expert – it's important to talk to someone who knows more about this topic than you do; whether it's a banker, accountant or another financial professional.
  4. Look for a bump in revenue– if possible try and increase your incoming cash flow by adding additional sources of income or cutting expenses wherever necessary.

Consolidation can give you some breathing room and make managing debt easier but it’s not always the best option depending on your particular situation. At the end of the day, being aware of these solutions and exploring them further can help put yourself back on track towards financial freedom!

7. Seek Assistance From Family And Friends

Asking your family and friends for help in getting out of business debt can be an unfavourable solution. However, it may also be the most practical way to get back on track financially. Utilizing their support is an opportunity to leverage resources you already have access to, making it both wise and economical. Metaphorically speaking, if we want our businesses to stay afloat, sometimes we need others to lend us a life preserver.

Here are five ways that enlisting the aid of your family and friends can help you manage business debt:

  • They could provide lines of credit or take part in loans with lower interest rates than traditional lenders.
  • You might be able to negotiate better terms from creditors when someone else cosigns on payments.
  • Your family and friends could offer cash advances when funds are tight.
  • Offering discounts or payment plans can make repayment easier for customers who owe money.
  • Credit cards may be available as another option for paying off debts quickly.

When looking at strategies for eliminating business debt, involving people you trust should not be overlooked; they are often willing to go above and beyond what third-party financiers would do.

For example, lending without interest or allowing longer payback periods — all of which will help lighten the financial burden during difficult times. No matter how much things may seem insurmountable right now, reaching out to loved ones could prove invaluable in getting out from under this mountain of debt faster.

8. Create a “Target Debt” or “Stack” Repayment Plan

This is an important step if you want to get out of business debt and experience financial freedom. It starts with understanding the amount you owe and identifying which debts should be paid off first. Then, creating monthly payments based on what fits in your budget and cash flow.

If you’re dealing with high-interest rates or struggling to make ends meet, consider refinancing any existing business loans at lower interest rates. You can also explore creative financing options like factoring invoices or accounts receivables into cash for immediate payment needs without taking out additional loans.

By creating a practical strategy for paying back all of your debt obligations, you'll have less stress each month knowing exactly how much money goes towards each bill every month. When done correctly, this will help you become debt free faster so that eventually your income has more room to grow!

9. Temporarily Pay With Cash

One way to get out of this precarious situation is by temporarily paying with cash instead of relying on credit cards or other forms of financing. Here are four key tips that will help you do just that:

  1. Start budgeting now – You need to know exactly how much money you have coming in each month and how much needs to be spent. This will allow you to create a plan for reducing debt while also determining where the rest of the funds should go (savings, investments, etc.).
  2. Cut costs everywhere – Every penny counts when dealing with debt, so look for areas within your budget where you can cut back on spending. Do research on comparable products/services from multiple vendors so you can get the best deal possible.
  3. Prioritize debts – Pay off high-interest debts first as they'll cost more over time if left unpaid. Make minimum payments on all other debts until those have been taken care of before moving onto smaller ones.
  4. Get creative about earning extra income – Consider taking on side gigs or selling items online in order to bring in some additional cash flow into your household and use it towards eliminating debt faster than expected!

10. Look Into Government Programs

Getting your small business out of debt doesn’t have to be an insurmountable challenge. One way you can tackle it is by looking into government programs that provide assistance for businesses in difficult financial situations. You may find the help you need to reduce or eliminate some of your debts, allowing you to get back on track and move forward with confidence. Here are a few things to consider:

First off, look into what grants may be available from the federal or state governments. Depending on where you live and the type of business you own, there could be several different types of grants available specifically designed to help entrepreneurs who are struggling financially due to debt. Do some research online and talk to other small business owners in order to identify whether any such programs exist in your area.

You should also investigate tax relief options that might be available through local, state and/or federal tax codes — this would allow you to reduce the amount of taxes owed and free up additional funds for paying down outstanding debts. Ask an accountant or someone knowledgeable about these matters if they know of any current regulations related to small business tax relief that could benefit your company.

Another option is creating a payment plan with creditors by negotiating lower interest rates or extending repayment timelines so that payments become more manageable over time. This could potentially save considerable amounts of money while simultaneously providing much-needed breathing room when dealing with large sums of debt. Finally, don't forget about crowd funding initiatives — this increasingly popular technique has helped many start-up businesses cover their expenses without having to resort to taking out loans or going deeply into debt.

If done right, getting your small business out of debt can not only prevent further financial losses but also put success within reach sooner than expected! With dedication and smart decision making, a brighter future awaits those who take action now by exploring all the solutions at their disposal!

11. Sell Unused Assets

Unused assets can be a lifesaver when your small business is struggling with debt. It's like having an ace up your sleeve – untapped resources that could help you pull yourself out of financial turmoil.

When times are tough, selling off any extra inventory or equipment can provide you with some much-needed cash flow to get back on track. Plus, it gives you more space and less clutter so you can focus on the essentials for running your business. You may even find that eliminating excess items helps boost efficiency and productivity levels!

TIP: Don't forget about intangible assets such as intellectual property; if it has potential value, consider selling it to raise money. Also, give thought to marketing strategies that would bring in revenue from customers who haven’t purchased anything recently. These two approaches will not only help reduce debt but also increase sales in the long run.

12. Create A New Business Budget

If your small business is in debt, creating and sticking to a budget is the first thing you need to do. The key is to create a budget that will help you pay off your debt sooner rather than later. You should focus on paying more than the minimum payment due for each of your business debts – whether it be for a business loan or credit card.

Your budget should also include making sure you have enough money set aside each month to cover any additional expenses related to running your business. This includes things like taxes, insurance, utilities, etc., so make sure these are accounted for when creating your budget. Additionally, if possible, try not to use any new business credit cards until the existing ones are paid off.

You'll need discipline and determination in order to stick to this plan but it can be done! Make sure you check in with yourself every once in awhile and adjust as needed if something changes regarding income or unexpected costs come up. Doing so will ensure that you stay on track with eliminating your business debt quickly and efficiently.


I know how hard it is to get your small business out of debt; I've been there. But with the right plan and some dedication, you can take back control of your financial situation. It's like a weight has been lifted off your shoulders – when you pay off that debt, you'll be free!

The first step is understanding how much debt you have and working on reducing costs. Then set up a repayment plan, create a budget and stick to it, negotiate better terms with creditors and look into government programs if needed. Once all these steps are taken, prioritize high-interest debts so they don't keep building up.

Finally, by selling unused assets or getting customers to pay sooner, you can start putting money aside for paying down those debts quickly. Don't let yourself feel overwhelmed – just take one step at a time and before long, you’ll be clear of this mountain of debt!