Guide to Cutting Your Business Debt

Debt is a financial drag. Diminish your debt and watch profits soar.
Owning your own business is great – unless the expenses are sucking up your profits and then some. Business loans, lines of credit, vendor accounts, credit card balances – all of these and more can place a serious financial drag on your business if you let it get out of hand.

Using these steps, get control over your finances so you can erase your debt and start making money instead:

1. Analyze every expenditure
2. Prioritize debts
3. Compare interest rates
4. Find hidden money

Action Steps
The best contacts and resources to help you get it done

Add it up
Get the big picture by determining exactly how much you owe and to whom. Then make it easier to pay creditors by limiting your expenditures. Analyze every penny you spend, from pencils to wages to shipping to advertising.
I recommend: Figure out just how bad it is with the free online CCH Debt Calculator. Use SCORE's template to create a 12-month sales forecast to help see if you'll bring in enough to cover the debt.

Prioritize your payments
You must deliver products or services to keep your customers and thus keep the business running. With that in mind, determine who must be paid now and which bills can wait. Offer to barter with your creditors instead of paying cash.
I recommend: For advice on your particular situation, get a free consultation with a SCORE volunteer. Join a local bartering consortium or the International Reciprocal Trade Association to keep future debt in check.

Collect money owed to you
Sometimes debt doesn't come from spending too much; it's from collecting too little. Look for money everywhere from tax reductions to past-due customer accounts.
I recommend: Encourage timely payments by imposing late fees. Use one of these templates to reminder/past-due notices. Don't hesitate to call or visit your customer in person to discuss late payments. Setting up a payment plan with your customer can be one way to get the cash flowing your way. Consult the IRS's business expenses checklist to be sure you're taking every possible tax deduction and tax credit.

Don't go it alone
If your debt is still staggering, turn to a debt-busting professional to help you regain control.
I recommend: Companies like Financial Technologies offer debt relief programs and counseling that can help. For constant inspiration on controlling your debt, turn regularly to a debt-management blog like The Debt Dr.'s. If there's really no way out, use FindLaw's checklist to determine if bankruptcy is the best way out.

Tips & Tactics
Helpful advice for making the most of this Guide

• Choose flexible vendors. Aim for those who can offer net 30-day or more terms. Ask for extensions or payment plans.
• Don't make promises to creditors that you can't keep.
• Consider consolidating. If you're in deep debt, a consolidation loan may make it easier for you to get a handle on what you owe and create more manageable monthly payments.
• Stop spending. Go bare-bones until you've paid everything off.
• Cease doing business with customers who constantly pay late or whose accounts are long past due.