Yeah, you know what finger I’m talking about. In our personal and professional lives, it can be difficult to get a handle on debt. You might think to yourself: “I’ll just finance this one thing. The return will be worth it.” But in the real world it rarely works that way.

Maybe the investment doesn’t pan out. Or maybe you’re seeing a little return, but it’s not enough to cover the interest you’re paying. Or maybe what you thought would be a boon for your business is turning out to be just one more of those things you never have time to get to.

What makes debt worse for SMBs is that many owners — for lots of different reasons — end up inextricably tying their personal and business finances. Clawing your way of a debt hole is doable, but it’s going to take a whole lot of willpower and a little bit of attitude.

Say no and mean it.

You absolutely must cut out unnecessary expenditures and free up money for payments and bills. Review your budget and throw sentimentality out the window.  Sure, it’s probably nice to have a cleaning crew come in nightly or weekly, but if picking up a broom and feather duster gets your debt paid off faster, suck it up.

Tell your clients to pay up.

All right, so “pay up” might not be the best way to put it. But you do need to be firm with customers who have a history of late or non-payment. There are three basic ways to make sure you’re getting the money you’re owed: focus your efforts on collecting past due items, establish stricter payment terms on invoices, and replace non-payers with prompt payers. Sometimes, you have to let customers go.

Prioritize payback.

Getting out of small business debt is a lot like getting out of personal debt. You need to come up with a smart plan for making payments on what you owe. Knock out the debts with the highest interest rates first. Those are usually credit cards.

Also give priority to any debts you have that are personally guaranteed. If the lender can come after you or your personal assets if you fail to pay, you could get yourself into a real pickle.

Talk your way out of it.

No, saying a few nice things won’t get your debts forgiven. But talking to your creditors and to credit counselors is a must. You may be able to negotiate a lower interest rate on your outstanding debts due to hardship. The only way to find out is to make the phone call. Credit counselors can help you find more creative ways to get back on track. Use every resource at your disposal.

Flip debt the bird.

Once you’ve eliminated your debt, be adamant about staying out of debt. Walk away from it and never turn back. That means developing a realistic budget and sticking it to it no matter what. Before you expand or take on a new hire, make sure you can do it without going in the red.


Image credit: lusi