Keeping Your Small Business Afloat While Dealing with Debt

How to Keep a Small Business Afloat While in Debt

Businesses of all sizes can be faced with debt at different times, and small businesses are no exception.

In times of economic trouble, it’s the small businesses that are usually hit the hardest.

With fewer investors and more difficulty raising capital, it’s easy to see why these businesses end up in debt.

But the good news is that small businesses can stay afloat while dealing with debt.

Here is some information for managing debt for your small business.

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Cut your spending

While cutting your spending can be difficult, you could be surprised at some of the areas you could save on your business costs.

Some simple ways to cut spending include:


  • Stop unnecessary travel.
  • Put a freeze on catering and hospitality.
  • Keep your office energy bills low.
  • Switch to free forms of advertising.
  • Look for more affordable suppliers.


With a little push to slash your costs, you could save your business money, at least in the short-term.

Manage your cash flow

It’s important for small businesses to stay on top of their cash flow.

Your cash flow can feel more manageable when your business is doing well, but when things slow down – that’s when cash flow issues arise.

If your business has a long operational cycle, where profits can take longer to become realized, you could find it difficult to continue operations.

This is what can lead to debts and ongoing difficulties for your business.

Effective cash flow management is crucial to helping your business survive difficult times and manage your debt.

Some of the things you can do include:


  • Meeting with a professional to discuss credit. Your bank could help you understand what’s needed for a bank loan and make recommendations based on your circumstances.
  • Open a line of credit. Having a credit line to deal with short-term cash flow problems can help keep your business afloat.
  • Be strict with your invoicing and make sure payment terms are adhered to – with penalties imposed for late payments.
  • Consider having a backup plan. Using your savings, borrowing from sources like family and other forms of borrowing could help you stay on top of things – at least in the short-term.


Managing your cash flow effectively is key to keeping your business’ finances secure.

This could be an important lesson for you for the future to monitor your accounts more closely.

Be smart with your debts

Many businesses deal with debt at some point, but it’s important to be smart about them.

Where possible, make a plan to pay them off – prioritizing those with the highest interest rates.

Any debts where you’ve put up personal collateral should also take precedent – you don’t want to risk your home or other assets.

Consider debt consolidation

Debt consolidation is another solution to help you deal with business debts.

Instead of making multiple payments to creditors, you could take out a single loan to repay them, focusing on making one monthly payment.

This will help your budgeting, but it will also help you to repay your debts quicker.

A reduced payment term and lower interest rates will make your repayments much quicker, and reduce the amount that you repay overall.

File for a consumer proposal

A consumer proposal can be another solution to your small business debt.

It’s a form of debt management that allows you to make affordable payments on your debts.

The main benefits of a consumer proposal are that your creditors are legally bound by its terms, provided they’re in agreement.

When filing a consumer proposal, if the majority of your creditors agree to the terms, they will all have to accept them.

This can lead to reduced repayments, as well as some of your debts being written off.

It seems like the perfect solution, but there are terms you’ll need to agree to as well.

Not only will you need to make your monthly repayments, but a consumer proposal also entails credit counselling sessions and it can affect your credit score for many years.

Consumer proposals are only acceptable for unsecured debts, including loans and credit cards, so it might not be the right solution if your business loans are secured against your home.

Dealing with debts can be stressful for any business owner, especially when your business isn’t doing quite so well.

While it’s tempting to wait around for things to pick up, you could end up making things worse.

By consulting a Licensed Insolvency Trustee, you can get advice to help you with your small business debt and find the right solution for your circumstances.

If you want to keep your small business afloat while dealing with debt, contact us today on (877) 879-4770.

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