How to Get Out of Business Debt in 5 Not-So-Easy Steps

E.J. Simonsen | Dec 22, 2021

Business debt can be terrifying, but isn't uncommon. If your business is in debt, and you're not sure if you can turn around, it's important to address it sooner rather than later. While getting out of business debt isn't easy, getting the right support can help ensure your business comes out on the other side. Here are 5 key steps to follow to help your business get out of debt. 

1. Review Your Budget

First things first — 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:

Now is the time to create one. Sit down, and take some time to total up all sources of revenue and all business expenses. Where are you spending the most? Where are you making the most? Do you 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 might seem overwhelming, but it's necessary if you want to get the 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

After you've got your business budget sorted out, it's much easier to identify unnecessary expenses. 

Start by categorizing all business expenses into "must continue," "negotiate," or "eliminate." 

From there, get rid of the expenses in the eliminate category. This could mean getting rid of unnecessary machinery or even downsizing into a smaller office. If your employees can work from home, you could potentially eliminate rent fees altogether. Remember, you can always lease new space in the future, but when things are tight you need to sacrifice where possible.

Next, start negotiating expenses in the negotiable category. From loan terms to insurance rates to contractors, there are often a number of expenses you can negotiate. Remember that negotiation doesn't always mean reducing the costs — you can also ask for a temporary payment suspension, a payment deadline extension, etc. Anything to buy your business a bit more time can help as you prioritize what debts to pay off first. 

As you work through expenses, remember not to add to them by paying exit fees or pricey settlements. If you can negotiate an expense down, that's great, but you shouldn't do so for an additional fee. 

3. Consolidate or Modify Debt

Your business debt is likely what brought you to this article in the first place. 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. 
  • Factor your 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
    (Beware of the Merchant Cash Advance Trap!) 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 experienced business debt relief attorneys

If debt is overwhelming your business, it's always a great idea to speak 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 unscrupulous lenders. 

At The Lane Law Firm, our clients are always our top priority. We're here to help businesses find the best path forward, whether that's debt consolidation, loan modification, or even bankruptcy. 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.

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