Dealing With Debt? How to Keep Your Small Business Afloat

Even without debt, running a business is challenging. But if you’ve been struggling to make ends meet, it may be time to consider your options for dealing with that debt. But, of course, the first step in getting control of your financial situation is making a plan and sticking to it.

The following steps can be taken:

– Find out how much money you owe

– Get current on any back payments or late fees

– Consolidate all debts into one manageable payment each month

– Start saving 10% of what you earn every month so that when the inevitable rainy day comes up again, you’ll have some savings set aside for it

If these steps don’t work and your business continues to struggle due to large amounts owed on credit, you’ll want to consider other options.

Avoid Spontaneous Financial Decisions

The first step is to avoid anything that might lead your business down the spiral of insolvency and bankruptcy, such as closing shop altogether, making rash decisions about staff and vendors, or mismanaging accounts. If you are a business owner, chances are you don’t have the proper training to make large financial decisions. Avoiding making these all by yourself will help spiraling into uncontrollable debt. Consult with someone when making financial decisions for your entire business, which leads to the next tip. 

Hire a Financial Advisor

If you have accumulated debt in your business, make sure you have a financial advisor. They will help you make smart financial decisions to avoid getting in even more debt. Once you have your debt under control either through working with creditors or filing for bankruptcy, work closely with your financial planner. They will help you avoid getting back into debt. They will be in charge of organizing finances and creating a budget for your business. Every small business will need to have a financial advisor at some point. It can be helpful if this person works solely with your business. They should be familiar with all the ins and outs of your financial situation and should have the business’s best interest in mind at all times in all decisions they make. 

Speak With Creditors

Dealing with debt is a lot like dealing with gambling; it’s better to stay in the game than take drastic action because when you get desperate enough, you are liable to do something irreversible. The best course of action is to contact your creditors directly, explain your situation honestly, and ask for a deferred payment program where they allow you to pay back what you owe over time without penalty. This can be an extremely effective way of dealing with high amounts of debt; oftentimes, creditors will work with a small business owner to help them get back on solid financial ground instead of forcing them into bankruptcy and sending their debt to collections. They might help you with loan consolidation to make your debt feel a little more manageable or find other solutions that work with your situation. 

Rework Your Budget

Don’t feel like a failure if you need to rework your budget. You might need to tighten up on your business spending, which is okay. You might need to go without certain items in your office for a while. For example, you might need to cancel your company’s summer party to save some money. Make sure you are transparent with your employees about finances so that they are understanding when you need to make necessary budget cuts. Small financial savings over time will add up to help you get out of debt faster than you otherwise would have. 


If you cannot negotiate a settlement, your next step is to file for bankruptcy protection. The first step to filing is to hire a business bankruptcy lawyer. Filing for Chapter 7 or 13 will protect you from creditors while giving you time to restructure your finances and pay off any outstanding debts with the court’s protection.

  • Chapter 7: Liquidation bankruptcy. If you have very little assets and/or income, this can be a good option for getting most of your debts discharged while still keeping your business open.

However, you must understand the consequences of filing for Chapter 7 before doing so; if there is any chance you may be able to pay back your debt with the help of a loan or settlement, then you would be better off choosing another option such as Chapter 13 bankruptcy protection.

  • Chapter 13: This allows you to repay what you owe over time (up to 5 years) from future earnings without having to liquidate your assets or incur additional fees. It helps individuals stay out of debt by allowing them to structure payment plans and avoid additional costs or interests.

Bankruptcy sounds like a scary word for a lot of business owners, however, filing for bankruptcy protection can be an effective option for dealing with high amounts of debt as long as you follow the court’s rules and stick to your payment plan. In addition, this will ensure you won’t lose everything should anything happen to set you back once again financially later down the line.

Without proper financial planning and debt management, a small business can quickly fail. Make sure your small business is successful and survives anything by following the right steps. Remember the tips above to help your business move forward even if you do fall into debt. There are always ways to get out, so don’t give up hope and keep finding ways to rebuild your business.