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Dealing Successfully with Small Business Debt

Often businesses are known to be struggling under overwhelming debts. Taking the correct amount of debt, that too, at the perfect time, could make all the difference between a successful business and a business that is struggling for survival.  As per statistics provided by the SBA (U.S. Small Business Administration) about 50% of small businesses tend to fail during the initial five years predominantly because of lack of capital, overwhelming debt, and poor credit arrangements.

Most businesses would be looking for loans for fortifying their cash situation, for bolstering financial growth and funding expansion plans. However, the past few years have been extremely critical and difficult for small businesses that ended up borrowing excessively without having the capability of making back what they actually owe. These struggling organizations could have survived the economic recession, had they taken a well-informed and sound borrowing decision in the initial stages. However, there is no scope for retrospection once creditors and debt collectors are after you.

In such a financial crisis situation, the small business owner is left with two options for effectively dealing with debt. The business owner may make all efforts to save his small business by trying his best to settle all outstanding debts or accounts. The other alternative is to let his small business fail of course, with an appropriate exit strategy which would be minimizing or mitigating financial consequences.

Save Your Business

The first choice for the business owner is obviously to try and save his business by using money from his own personal funds and diverting it to his own business. This seems to be a calculated risk which till date has failed an equal number of times as it has tasted success. You could choose this solely as a short-term strategy which promises chances of a long-term repayment of the outstanding debt.

Reduce Costs

If you are not in a position to get rid of the business debt by using private funds, it is essential to identify and determine relevant areas where you could do some effective cost-cutting. May be you could consider subleasing unused space or selling off spare equipment. Even though, shrinking your workforce may not be a desirable option, you may need to do that for keeping your business afloat.

Contact Suppliers & Customers

Keep in touch with your customers. Offer attractive markdowns to top customers if they are able to pay you fast. Contact your suppliers and request them for deferred payments and even discounts if possible.

Get in Touch with Your Creditors

The best debt relief option in case of multiple debts is debt settlement. Try connecting with your debt collectors or creditors and explain to them your predicament. Request lenders to accept lower interest rates, restructure all the existing repayment options, or boost your line of credit. If multiple collection agencies or creditors are running after you, nagging you via phone calls, and taking you away from operating your business seriously, you could get in touch with a legit debt settlement company. They would be negotiating effectively with your creditors for settling all your debts for an amount that is definitely lower than what you had taken out as a loan.

Consolidate Your Loans

You may opt for debt consolidation. The process involves consolidating all your business debts into one single loan and payment that would cut down monthly expenses without impacting your credit score negatively.


When you have tried the above-discussed ways to get out of your small business debts and failed, you may look for remaining alternatives such as selling off the business or liquidating the assets for negotiating a debt settlement with all your creditors. However, when all else fails, you could file for bankruptcy. Of course, it may have some drastic repercussions on your credit report.

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