4 Strategic Tips For Paying Off Your Business Debt

4 Strategic Tips For Paying Off Your Business Debt in 2017

I had originally considered writing this post with advice for getting out of business debt before the end of the year, but realized within the given time frame it’s not exactly feasible for most entrepreneurs. Frankly, making fast payments is also not the smart way to approach debt either.

No matter how much you owe, don’t panic. Instead, educate yourself about how the numbers added up and what your repayment options look like for getting out of debt. By understanding how your current financial standing affects your small business, you can create a strategic plan of action for paying it off.

It’s time to get a head start on paying off debt. Here are the key elements that every plan should cover — and hopefully, these tips keep you from repeating past money mistakes with your small business.


1. Hang on to, and review, your receipts.

Before you can plan on how much you want to save or what costs to cut back on, take a look at the receipts for business expenses. Receipts serve as a good footprint for determining which expenses are investments versus those that are frivolous purchases. If you already spot small items like daily coffee runs or lunches adding up that don’t contribute to the business, you can start curbing that kind of spending since it isn’t a necessity.

Pro tip: if you’ve made a charitable donation on behalf of the company or recently took a trip on business, it might be eligible for a tax deduction. Save these receipts when you file your taxes!


2. Begin cutting costs.

While some say it’s a better idea to stop creating debt altogether, most entrepreneurs find it easier to review receipts and financial statements to study profits and losses over the last six months. By doing so, they’re able to determine what can be cut out of the budget before paying off debt.

When trimming costs, be mindful of expenses that will negatively impact your employees or customers like raising the price tag substantially on a popular product or cutting vacation benefits. If you’re not sure where to start first, here are a few simple ideas to get you started.

  • Turning off lights and computers at the end of the day to save on electricity bills.
  • Recycling and going paperless.
  • Joining a coworking space if a lease on a commercial building becomes too expensive.


3. Determine the best way to eliminate debt.

Two popular methods of paying down debt include the Snowball Method and the Stack Method. The Snowball Method consists of paying off debts or loans that have the smallest balances first while gradually moving on to those with larger amounts. Typically used for credit card debt, the thought process is that by the time you’re down to the single largest debt, you have no other expenses distracting you from paying it off in full.

The Stack Method takes the opposite approach in that you pay off the debt that has the highest interest rate first and gradually move on to the smaller ones. While the decision is different for every entrepreneur, my personal recommendation is to use the Stack Method. Startups that carry business loans with a high interest rate struggle enormously, as does any business with high interest on a company credit card. By prioritizing paying off debt with the highest interest first, you can pay down other outstanding debt faster. Once your business credit cards are paid off, your credit score will improve and allow for more opportunities to benefit the business.


4. Consider consolidating or working with a professional.

One of the most effective ways to pay off debt is to consolidate and refinance loans. By doing this, the loans may qualify for lower interest rates reducing the amount paid each month. Much like determining whether you would be a better fit for the Snowball or Stack Method, many factors go into play depending on your business and the nature of its debts.

If you’re still not sure what the best option for your business is, don’t force yourself to pick a plan for repayment that won’t work for you. Speak with a debt expert and see which option is the best fit or if there are other options that might be even better.


As I mentioned in the opening, the key to paying off debt is all in the details. Understanding what you owe, how it accumulated, and what your options for repayment look like truly matter when you pay off business debt in order to further invest in the future of the business and its growth.




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