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5 tips for digging your small business out of serious debt

If your small business gets into debt, it can quickly become difficult to keep on top of and can easily build up.

When in debt, many small businesses decide to take out another loan to pay the first one off and continue this cycle, spiralling into more and more debt. This spiral can take a lot of hard work to get out of. These debts will prevent you from achieving your business’s financial goals, so it's important to avoid it wherever possible. If you find yourself in this situation, you should try to cut costs wherever possible and set extra money aside each month ready to help pay the debts back.

Here are our 5 tips to help you work your small business out of serious debt.

   1. Cut unnecessary costs and free cash up

Keep a strict, frequent check and balance on the total expenses going out of your business so that you can evaluate and eradicate unnecessary expenses and work out how to adjust. If your business’s debt is growing, it may mean that your budget is too high, so consider reducing it. Manage your inventory and avoid purchasing extra stock, and keep your monthly debt payments separate - don’t spend it! Chase down any customers who haven’t completed their payments, or clients who owe your business money. Another alternative is to boost sales by offering flash deals and other limited offers in order to gain more customer’s attention, which could be done through advertising on social media to spread the word quickly.

   2. Reduce costs

Consider selling off some of your assets, like selling expensive equipment and replacing it with second-hand versions or by finding equipment that won’t have a big drop in value over a short period of time. If you're in very serious debt, consider downsizing your office or sharing office space and splitting costs with other small companies. Joining forces with other small companies locally that are similar to yours will lower prices.

   3. Consolidate your loans

Consolidating loans into one monthly payment will allow you to reduce monthly costs without harming your overall credit. In a small business, serious debt can lead to cash flow problems, which will then create more debt. By consolidating the debt you have taken, you can refinance your small business and pay back the debt in smaller monthly amounts. This can be done over a long period of time, sometimes over the course of a few years, which will allow your company to continue growing without an excess of debt payments. The smaller the sum leaving your business’s account each month, the less cash flow problems you’ll face.

   4. Make some payments

Paying debts back is the most important thing and should be prioritised as number 1! Cut back on expenses or wait until the debt is paid and tightly limit personal expenditure. Take inventory of your debt list, make it organised so that you can list the debts from smallest to largest.

If you pay off your smallest first you will see ‘wins’ quickly, so you will feel you are getting somewhere, making it easier to keep going and work up towards the larger debts. If you pay off the largest debts first you will be able to pay less tax interest, especially if some of the debt is under personal guarantee, otherwise, personal assets could get seized.

   5. Credit cards

How many does your company have and are they actually necessary for your business’s growth and success? Cards could cause unnecessary spending at times which will result in more debt. Using credit cards means your business is delaying paying its expenses and this can build up. Try using a debit card so the money actually leaves your account rather than money that you will potentially have free to spend.

If you're not getting anywhere seek help from a credit counselling organisation as they will be able to offer debt management help. Be aware that they may charge a fee or require you to be in serious debt from multiple lenders before they’ll consider helping you. But their help will outweigh their costs as they will be able to help your business get back on its feet.


Shieldpay protects both buyer and seller in any transaction so that you can deal with anyone, anywhere with total confidence.

How do we do it? We verify the identity of both sides, funds are held securely in the Shieldpay vault and only released when both sides agree they’re happy. If anything doesn’t go to plan, we help out with any disputes!

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