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Top Tips for Paying Off Debt for Your Small Business

Knowing that your business’ debt is piling up can be an excellent motivator to do something about it, but it can also feel overwhelming to handle. Creating a debt reduction strategy can help business owners take back control of the situation, paying off business debt as promptly as possible.

Learn how to pay down debt fast with these business debt management tips below.

Creating a Debt-Reduction Strategy

There are several debt reduction strategies small businesses can use to get ahead of their debt. It's always best to try and pay off your debt as quickly as possible. The less time it takes, the less debt will accumulate. Consider using this company debt advice to help you achieve your financial goals.

Set a business budget and stick to it

Maybe your last small business budget didn’t work out the way you planned. But figuring out why it didn’t work or what went wrong can help you create a new budget for your current financial position. Assess your existing small business debt and assets by using debt ratio to help you create a financial plan that works with your current situation.

Try implementing a timeline alongside your budget to set specific deadlines for paying off credit card debt. Hammering out a savings and spending plan and sticking to it using a repayment timeline will help you feel more in control of your situation going forward.

It is in your business and your best interest to be completely transparent and honest with yourself on the business accounts when calculating this budget. Map out all operating costs, business credit card accounts, debts and interest payments, funding opportunities and business loans to help guide your financial decisions going forward.

Consider using this small business budget template to help you in this endeavour.

Find ways to increase revenue and income

A big part of paying off company debt is about maximizing cash flow. First, identifying and paying off the accounts with the most debt, or the highest interest and fees, is always a good idea. To pay off the most significant business debt, you need the inflow of cash. Finding ways to increase revenue and generate income will help lessen your debt load.

Brainstorm the different ways you and your company could increase its cash flow. Can you diversify your business services or products to take advantage of a gap in the market? Raising or lowering prices, offering a flash sale, upselling to customers, focusing on the most popular products in your store, or revitalizing your marketing strategy, are all actionables that can potentially boost company sales.

Decrease company spending

Cutting back on any business expenses you can do without means putting more money into your debt repayments. Create a list of your monthly expenses to determine what costs can be cut down or cut out altogether.

Minimize inventory to maximize cash flow or stop the company’s charitable giving until the business debt is paid off. Whatever you can save in the way of extra expenses, you can place into your debt payments to ensure the swift repayment of what your business owes others. It may be surprising that small monthly costs add up to big savings.

Try negotiating with suppliers and lenders

Approach the suppliers and suppliers you have the best working relationships with to see if you can reach a more advantageous agreement. If you have been a loyal client of theirs, they may be more likely to compromise on a better sales agreement or extend business credit to your accounts.

On the same note, discussing with your lenders to see if they will lower their interest rates or fees can also help. In either instance, you should create a case for your business and back it up with evidence of why lenders and suppliers should work with you and compromise on their rates.

If you have a good business relationship with them, chances are you can improve your circumstances and pay off business debt that much quicker.

Automate business debt payments

Start paying off debts without a thought when you set up automatic withdrawals from your business account. Check your debt payment terms and decide you feel comfortable with leaving your business bank account open each month. Knowing a consistent amount of money is exiting your accounts at a given time will keep your financial priorities in check, and your business debt repayments at the top of the list.

These automatic withdrawals will also keep you accountable to your budget and timeline as you have already accounted for the amounts needed to pay off business debt.

Sell assets and then lease them for less

Check to see if you have any newer business assets that can be sold back to the original supplier and then leased for less. Depending on the assets, you can save money each month by renting them instead.

Crunch the numbers before selling off assets to ensure this approach financially benefits the business in the long run. Check your credit agreements if you bought the asset on credit to see what can be done about returning it. Whatever you save can then be put toward paying off your credit card debt faster.

Apply for a Debt Consolidation Loan

A small business debt consolidation loan is about consolidating your debt into one long-term package. Talk to your lender to see if they will consolidate the debt into one package.

You should also check the debt covenants of your current loan terms, as these will stipulate certain factors about what you can and cannot do about your debt.

If you cannot consolidate through the lender, small businesses can apply for large business loans to pay off debt and consolidate what they owe to one entity. However, applying for these bank loans can be tricky when the intent is business debt consolidation.

Learn more on the top Canadian business loans to help you when applying.

Utilize available tools

Getting out of debt help can be hard to find. The right tools and resources can support your business as you slowly but surely pay off what you owe others. If your debt load is too overwhelming to tackle on your own, you may consider hiring a debt restructuring firm to help you with your small business finances.

Otherwise, companies can use accounting software, like QuickBooks Online, to generate budgets while automatically tracking expenses and revenue. It can even help you organize your finances when applying for loans to pay off debt.

QuickBooks Online offers small businesses financial independence, providing professional support, every step of the way. Keep tabs on your business’s financial health at all times to help you pay down your business debt with a free trial today.

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