Effective Strategies for Reducing Small Business Debt

Small business failure has been attributed to lack of money, poor credit management, and using business funds for personal use. Businesses which go through lack of funds for covering the basic expenses like payroll and rent could be heading towards delinquency and even bankruptcy in worst case scenario.

Today, it is quite difficult for small businesses to provide adequate proof that they must be cleared of some or most of their existing debts via Chapter 7 Bankruptcy. This is primarily because of the Bankruptcy Abuse and Prevention and Consumer Protection Act that was introduced in 2005.

In order to make sure of your business’s overall financial well-being, it is mandatory on your part to know and understand the different options that are at your disposal to effectively and methodically pay off all your business debt.

Scrutinize and Modify Your Business Budget

Before you start tackling business debt, you must try to assess and evaluate your present financial condition. In case you are consistently falling behind on your monthly payments, you need to revise your financial plan. You must make adjustments in your budget for unanticipated cash flow changes.

A business budget is a good way of identifying your income sources, variable expenses and of course, the fixed costs. Budgeting is a good way of planning your spending and keeping aside some money every month that would go towards paying your rent, and paying off your creditors and suppliers. Revisit and revise your existing budget for effectively managing your expenses and for crafting an action plan to fulfill your debt-reduction objectives. Seek professional company debt help to come out of your financial crisis.

Reduce All Your Business Expenses

Thoroughly examine all your functional expenses. Identify the expenses that could be done away with. Also, determine what services are compulsory for the smooth running of your business. You must get in touch with a financial consultant to understand the implications of cost cutting on different areas pertaining to your business.

You could reduce your costs in many ways. Suppose you have a leased office; you could sublet the unused space or downgrade to a relatively smaller workspace to cut down your monthly expenses. You could consider negotiating flat rates and reduced prices with some vendors. Go through your bank statements to check out your expenses that may be directly contributing to your current debt. Cost cutting could be the fastest and the most efficient way of boosting cash flow and paying off your debts before adopting some drastic steps towards debt reduction.

Negotiate with Your Creditors for Debt Settlement

You need to prioritize your debt payments if you are consistently falling behind on your monthly payments. You need to understand which suppliers or creditors require paying off first. Once you know the exact amount you could spend on repaying your outstanding debts, you must consider getting in touch with your creditors to discuss and convince them to arrive at agreeable payment terms. You must consider debt settlement, instead of filing for bankruptcy. Negotiate with your creditors effectively. Debt settlement would be leading to dropped account balances and affordable monthly payments. Remember to get a legal document or the signed settlement agreement.


The above-mentioned strategies are quite helpful to get rid of financial crisis and debts. Do not allow debts to ruin your health and happiness. Stay on top of debts. Use smart debt management techniques like debt settlement.

Author Bio: Enrique Joseph is a financial consultant in a multinational firm. He has recently started blogging. He runs his own finance and debt related blog. His posts are quite helpful. In his recent post, he has discussed about company debt help.