Startup Business Debt

Starting off a small business, or even growing your small business, is tough. A good proportion of start ups fail because they cannot get access to capital, have poor credit arrangements and already carry too much debt.

The economy has been tough over recent years, and for businesses that want to bolster cash flow or finance growth or expansion, getting access to that credit has been made very difficult. For those businesses that have established themselves by borrowing, paying this money back without the capacity to do so makes life much more tough.

As a business owner, it is no good thinking about the ‘what ifs’ and ‘maybes’. Yes, you may have been able to borrow less, or funded something in a different way. But, as soon as creditors are at the door, it is too late to start thinking in hindsight.

If debts have becoming unmanageable, then the business needs a plan to either resolve these debt issues or, if things have already got too serious and there is no way the business can pay back the debt, an exit strategy is required that helps minimise the financial consequences.

If your business has debt issues, these are the options available to you.

Personal Funds

If your business is your livelihood then putting your own money back in to the business, from your own pocket, could be an option that is available to you. However, any savings that go in to your business should be treated as a short term measure that has long term benefits. This measure could also form part of a more comprehensive debt management strategy for your business.

Cut Costs

If you cannot help your business using your own private funds, then the next logical area in which you could save money would be to reduce costs. Reducing your business costs can come in a variety of guises, from subletting your unused business space and reducing hours of any staff to buying cheaper tea and coffee. It is important that you can take a realistic look at your own business to help identify the potential areas where costs cutting can take place to keep your business alive.

Contact Customers and Suppliers

If the business has a good solid customer base, then you should be seeking out ways to increase the exposure of the business. Encourage up-sell and cross-sell other products and services to your best customers. Consider offering the frequent spenders discounts if they pay quickly and defer payments to your suppliers.

Contact Creditors

Communication with creditors is key, especially as they have the potential to ease any debts that you may have. Open dialogue with your creditors to explain your situation, and act as early as possible. This gives you the best possible start in finding a solution that meets everyone’s interest.

With working together with your creditors, they could offer a number of different solutions, including increasing your credit, restructuring your repayments or offering payment breaks.

Do not ignore your creditors as they will be more reluctant to work with you to find a solution.

 Consolidate Loans

There are plenty of companies that can offer a debt consolidation loan, and this can significantly help your business by consolidating your debts in to one single outgoing payment.

The consolidation loan works by contacting your creditors, working out a new financial arrangement with each of them, and then allows you to make just one payment to them every month. It can also help reduce your monthly costs, as well as the overall interest that the business pays in interest on existing debts.


This, for any business, is usually the last resort. Bankruptcy is often a complex, and expensive process for any business to go through. However, if the business cannot be salvaged by using other ways to manage the business debt, then bankruptcy is the normal, and only, route that business owners then take.

Sell the Business

If the business has the potential to be profitable, then you could try selling the business as a way to pay off your lenders. Selling the business in its entirety is far easier than selling off the businesses assets. The sale of a business could mean that you repay creditors more quickly.