Business debt can feel overwhelming but understanding how to get out of business debt is the first step toward taking back control. Getting the right support and addressing the debt as soon as possible, can help ensure your business comes out on the other side. Here are five key steps to help your business get out of debt.
1. Review Your Budget
Does your business have a budget?
If your business has a budget:
Where does your business stand in relation to the budget you'd originally proposed? In what areas has the business overspent, and are there any areas where you might still be under budget? A close analysis of where you are and where you should be can help you start to understand what steps your business needs to take to climb out of that debt.
After taking a close look at your budget, identify which changes you can make to reduce expenses and pay off debts. Take your time to go through it line by line, ensuring there's nothing you've missed or money you can redirect to pay off some of those outstanding debts.
If your business doesn't have a budget:
If you haven’t created a business budget yet, now is the time to start. Take time to calculate all sources of revenue and all business expenses. Identify where you are spending the most and where you are making the most. It's important to have a clear understanding of where every dollar your business makes is going.
Creating a budget from scratch when your business is pressed for money can feel overwhelming, but it's necessary if you want to get your business back on track. A little organizing and budgeting now can save your business millions in the long run, especially if it helps you get a better picture of your revenue and debts. It's good to know that you can get support with your business budget if you're unsure where to start. There are many budgeting tools from well-known, trusted resources like:
Plus, it's always smart to talk to a local business debt relief attorney in your state. They have the experience to help you start to put all of those numbers in order and identify where you can make meaningful change.
2. Reduce Business Expenses
With a business budget in place, it will be much easier to identify unnecessary expenses. Begin by sorting all business expenses into three categories: must continue, negotiate, or eliminate.
Eliminate nonessential costs:
This might mean getting rid of unnecessary machinery or even downsizing your workspace. If your employees can work remotely, you could potentially eliminate rent fees altogether.
Negotiate where possible:
This could include adjusting loan terms, insurance rates to contractors, or payment schedules. You can also ask for a temporary payment suspension or a payment deadline extension to ease cash flow.
Avoid adding extra costs like exit fees or settlement fees while renegotiating. If you can negotiate an expense down, that's great, but you shouldn't do so for an additional fee. Every dollar you save brings you closer to figuring out how to get out of business debt.
3. Consolidate or Modify Debt
Business debt is a common concern, but what many businesses don't know is that it's possible to consolidate or modify debt to minimize some of the financial burden. Take care to seek out reputable lenders like small community banks or credit unions and look into how you can consolidate or modify that business debt through them. A few common, reputable ways to modify business debt include:
SBA Loan Modification:
Some loans, like SBAs, can be modified to help relieve your business of the financial pressure it's currently facing. SBA loan modifications are typically regulated and overseen by the bank through which the loan was obtained. It’s often best to find an experienced attorney or SBA expert in your state for loan modification support.
Long-Term Structured Settlement:
Your business can also modify debt through a long-term structured settlement. For this option, it's best to find a reputable, experienced business debt relief attorney in your state. Often, they can help you renegotiate your loan terms to get your business the time it needs to increase cash flow while also reducing overall debt.
Be aware that there are many risky ways to consolidate or modify business debt. It's always best to start with reputable lenders and experienced business debt relief attorneys for guidance. Most community banks and attorneys will offer free consultations to educate you on the options in advance of you making a decision. Stay away from predatory lenders proposing reverse consolidation or merchant cash advances, as these will often lead to greater debt and worse terms for your business.
4. Increase Revenue
In times of crisis, increasing revenue might be the last thing on your mind. That said, it's one sure way to help eliminate business debt, and there are plenty of ways to increase revenue relatively easily, depending on what your business does.
Sell unused assets:
If there are any pieces of equipment, unnecessary inventory, or any other type of unused assets hanging around your business, selling them is one great way to increase revenue.
Factoring receivables:
Accounts receivable factoring means you sell an invoice to a factoring company, which will pay your business a large percentage of the invoice as an advance. Once your customer pays the invoice to the factoring company, they'll follow up with the remainder of the invoice amount, minus any fees. While this is a smart way to increase revenue, make sure you thoroughly vet any factoring company before proceeding. There are many unethical companies out there for example — who may pose as a factoring company but are actually out to capitalize on your business debt.
Identify profitable services:
Since you've recently reviewed your budget, which of your services were most profitable? Is there a way to prioritize those services over others as your business works to reduce debt? Selling more profitable goods and services can help boost that revenue quickly.
5. Get Help from Business Debt Relief Attorneys
When debt becomes overwhelming, it's important to consider speaking to a professional before making drastic or long-term decisions. Business debt relief attorneys can help provide a clear, third-party perspective while helping you maintain your rights against predatory lenders.
At The Lane Law Firm, our team helps Texas businesses navigate debt challenges. We understand how to get out of business debt, whether through structured reorganization, negotiation, or other legal options tailored to your needs. Our business debt relief attorneys work with Texas businesses to fight predatory lenders and discover the business debt relief solutions that best suit your needs. For more information, or for personalized help resolving your business debt, get in touch with the business debt relief attorneys at The Lane Law Firm.
