Guide to Debt Consolidation for Small Business

Get out of the red with better money management
A big balloon of business debt is enough to drown even the most optimistic entrepreneur. Consolidating pay-outs with these steps will help you see less red and more green:

1. Make a complete accounting.
2. Negotiate with your creditors.
3. Work with a pro.

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

Take a tally
Get an accurate financial picture by determining exactly how much you owe and to whom — as well as what's owed to you.
I recommend: Add up the arrears with CCH's Debt Calculator. Create a 12-month sales forecast with SCORE's template to determine how long it will take to earn what you owe. To collect any outstanding money owed to your company, call or visit customers, impose late fees or use one of these templates to generate past-due notices.

Liquidate what you can
Turn all but essentials into cash to pay down the debt even further. Secure your remaining assets to shield them from litigation.
I recommend: Put real estate and investment assets into a limited partnership and distribute non-vital business assets to owners. WiserAdvisor can help you in a free search for a financial advisor.

Prioritize your payments
Determine who must be paid now for you to stay in business, and which bills can wait. Offer to barter with your creditors instead of paying cash. Negotiate debt reduction on your own only if you're confident the company won't then file a claim.
I recommend: Call one of SCORE's retired executive volunteers to help with the tough decisions. Bone up on BusinessBalls' Debt Negotiation Tips to make creditor conversations go smoothly. Join a local bartering consortium or the International Reciprocal Trade Association to avoid future debt.

Get outside help
You don't have to go it alone.
I recommend: Companies like Business Capital or Commerical Debt Counseling Corp. can help you restructure your debt. Remember to keep critical suppliers out of the debt-restructuring agreement so vital supply lines stay open.

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

• List all debts, even those you deem minor or flexible.
• Don't make promises to creditors that you can't keep.
• Stop doing business with customers who constantly pay late or whose accounts are long past due.
• Keep expenditures at a minimum until everything's paid off.
• Limit your exposure: Avoid offering personal guarantees on business debt; it can ruin your personal credit history.