Best Ways to Manage Debt as a Business Owner

Share via
Best Ways to Manage Debt as a Business Owner

Having a lot of business debt can be devastating to your business and personal finances. If you have a sole proprietorship, your business debt is likely tied to your personal credit. As such, it is essential to get a handle on business debt quickly to save your personal finances and credit as well.

Reduce Credit Expenses

Go over your business budget and see where you stand financially. Then, take a close look at your expenses. What can be eliminated? Look at unsubscribing from subscriptions that you rarely use, professional organizations that offer little benefit, or high priced vendors. Try to negotiate lower prices with vendors for the necessary operating expenses.

Once you take a look at what expenses you can cut out, your next step is to see what expenses you can pay for in cash. Try to pay for as much with cash as you can, and stop using credit if possible. This will at least keep you from getting further into debt, even if you can’t afford to pay off the debt you have already accumulated.

Communicate with Creditors

The worst thing you can do as a business owner is ignore the debt that you can’t afford to pay. Communicating with creditors will help keep your accounts in good standing. You may be able to negotiate lower interest rates or different payment terms to work with your budget.

Some creditors may be able to offer loan consolidation to start your payments over with a lower interest rate and lower monthly fee. Other creditors and lenders may provide you with a hardship plan which can help you get back on track with your loans and accounts without going over your budget.

Debt Restructuring

A debt restructuring firm can help you restructure your debt to make it more manageable. They can often formally change the terms of your repayment plans, extending or renewing payment agreements. These firms do charge a fee, but it may be a less expensive alternative to bankruptcy if you are able to pay even a portion of your debt now.


Unfortunately, filing bankruptcy as a sole proprietor business owner is usually tied to your own personal credit. However, this is also an advantage in a way. When you file bankruptcy as an individual, you can opt to file Chapter 13 and pay a portion of your debt, which is better for your overall credit. This is only an option if you are a sole proprietor, however. Most other businesses file Chapter 7 bankruptcy, which discharges the debt.


If you are the sole owner of your business, your personal assets can be included in your bankruptcy. But do not worry about being left with nothing. With bankruptcy exemptions, you will be able to keep some of your personal property, including your home, your car, and other personal possessions. It is essential to work with an experienced lawyer who can help you keep as much of your property as possible.

Image Credit: Flickr

Share via
John is a serial entrepreneur and writer who is passionate about helping small businesses launch and grow. His work has been featured in Huffington Post, Entrepreneur, and Forbes.