How to Get Out of Debt as a Small Business Owner

Running a business doesn't automatically mean your personal finances are in good shape. Plenty of business owners have a business that is doing fine on paper but are drowning in personal debt thanks to credit card loans or overdrafts that are in a mess behind the scenes.

However, ignoring personal debt because your business is doing well will only result in things getting messier. You are paying more interest, and the levels of stress you're carrying are increasing.

Let's take a look at a few things that can help you get out of debt.

Cut Unnecessary Expenses

Everyone has payments they've forgotten about or are so used to paying they're not aware of it anymore. It's gym memberships no one uses anymore or isn't enough to justify paying for, it's food delivery apps and charges for just ordering a meal in, or a subscription service you pay for but don't use much anymore.

You need to go through your bank statement line by line and see exactly what you're paying for. For a lot of people, these stray payments you are not aware of can run into hundreds of dollars a month.

Cancel anything you're not actively using, downgrade plans if you can and don't want to cancel entirely. Then look for auto-renewing software trials, unused storage plans and memberships you forgot to cancel.

It’s not about cutting everything enjoyable, just those things you're not using enough to justify paying for.

Get Debt Advice

Trying to figure out a repayment order or whether settlement makes sense or how to deal with creditors alone often means more stress and slower progress than is helpful when trying to get out of debt. Debt relief specialists work through these decisions for a living, and they can tell you fairly quickly whether your situation calls for a repayment plan, consolidation or a more structured settlement process. Alex Kleyner, CEO of National Debt Relief, has spoken about how debt settlement is a next step, not a first step for people who have already tried other options. But the thing is, getting professional advice can save you months of trying to juggle everything, and it removes the guesswork, giving you the advice you need for the right choice for your situation.

Pay Down High Interest Debt First

Not all debt costs the same. A credit card at 24% interest is doing far more damage than a car loan at 6%. Yet many people split payments evenly and across everything they owe simply because it feels fair.

Directing extra payments toward the highest interest debt first while making minimum payments on everything else clears the most expensive debt faster and saves the most money overall. Once that top debt is gone, the payment that used to go towards it can roll straight into the next highest rate so each balance gets cleared faster.

Separate Personal and Business Expenses

Using a personal credit card for a business or dipping into business income to cover a personal bill makes it nearly impossible to see where money is actually going. A dedicated business account and card, even for a small operation, keeps the two separate enough that personal debt doesn't grow because it's intertwined with your business expenses. Plus, it makes it easier to keep business activities separate, so they are not impacted by personal debt.