February 7th 2020 at 10:31pm Published by firstdownadmin

Businesses, like individuals, sometimes suffer from too much debt. Taking on the right amount of debt – and at the right time – can mean the difference between a business that struggles and one that succeeds. According to the U.S. Small Business Administration (SBA), roughly 50 percent of small businesses fail within their first five years, largely because of insufficient capital, poor credit arrangements and too much debt.

If your monthly income and expenditure have become unbalanced, take a step back to look at where the extra expenses are creeping in. You can then make adjustments to your budget so that you can plan for the future without compounding your debt even further.

Apply for Working Capital

Small Business Owners have some options and here are some important tips on what to do to reduce and manage debt:

Cut Costs

You may be able to identify areas for potential – and fast – savings, so that you can clear your debt more quickly. Do you have any unnecessary expenses that aren’t essential to the running of your business? For example, are you paying for subscriptions or leasing equipment that you could live without for a while? Can you negotiate lower rates or deals from suppliers, or get better rates by switching suppliers? You could even think about joining with other small businesses to order in bulk, for better value.

Contact Customers and Suppliers

Stay connected with your customers, and seek out ways to increase your exposure and/or improve your business model, and thus your revenue. Offer your best customers markdowns if they can pay you quicker. You should also contact your suppliers to arrange discounts and/or deferred payments. 

Contact Creditors

Contact every creditor, and advise them of your predicament. Ignoring your funders can only make matters worse, while tackling a debt problem is easier when you act early. Since it’s in everyone’s interest to find a solution, request that your funders work with you to lower cost of working capitals, increase your credit line or restructure your repayment options. 

7 Easy Steps to Eliminate Small Business Debt

  1. Assess and rework your budget.
  2. Reduce expenses.
  3. Temporarily pay with cash (if you can).
  4. Communicate with creditors and funders.
  5. Create a “target debt” or “stack” repayment plan.
  6. Increase your income.
  7. Hire a debt-restructuring firm.


Speak to one of our qualified and seasoned Small Business Funding Managers to better understand what funding options and approvals we have for your small business.


Another form of undesirable debt is tax debt. It’s an issue faced by many of my self-employed clients. Unlike when you work for a company where they withhold your income tax contributions and remit them to the government for you, as a self-employed person, those tax contributions become your responsibility. If you have employees, or collect sales tax, you are also responsible for remitting these payments when due.

While debt is generally viewed as a negative, if used wisely, it can be a great tool for your business—but only if you view it as a strategic tool and not as a way to sustain your company.  Explore different financing options like leasing or receivables financing that allow for more stability than using your line of credit. And always have a business plan that accounts for debt repayment.

Apply for receivables financing

No matter how tempted you might be to tap into your personal assets, such as your home or registered savings, I would strongly urge you to avoid depleting your personal assets to support your business. This is particularly true if your business is struggling. If you feel the need to do this, then it may be wiser to seek help with your existing business debt and learn about ways to consolidate your debt, or if necessary negotiate a restructuring plan.

If you take calculated steps and plan before you borrow, you are more likely to avoid the financial speed bumps that come with debt when managing your business. 

Looking for small business funding that fits your business budget?  contact First Down Funding for funding options.