Don’t Ignore Your Small Business Debt

Managing small business debt
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As a lender, we talk to hundreds of customers both potential and returning every day. Their challenges with debt and credit are often entwined with their particular triumphs as small business owners, but debt does occupy a central place in the average business owner’s mind.

This will not be an article about avoiding debt altogether, but rather about effectively managing that debt. You will have to take some on to get loans, leases and other kinds of lending in order to finance the projects big and small at your business. Companies and people alike need to have debt to maintain the quality of their credit scores, too.

The key to managing your debt is to make payments on time and never bite off more than you can chew. Both of those can be difficult for even the most seasoned small business owner, but here’s a couple of tips for effectively managing debt and not getting yourself into trouble.

  1. Making those payments on time. Be sure to work with lenders to develop a payback schedule that makes sense for your cash flow, and miss as few payments as possible. Whatever you do, do not get caught in a death spiral, making every payment late and falling behind. Once creditors get involved or you’re stumbling and fumbling your way to each payment, you’re going to start to take a hit in your credit score, among other consequences. Which brings us to our second point.
  2. Do not bite off more than you can chew. Yes, as a lender, Direct Capital likes it when we’re able to lend money to small businesses. Our chief concern, however, is helping you grow your business and thrive, not giving you money you can’t possibly afford to pay back. Try to limit yourself to one or two active loans/leases at a time so you can easily manage paying them back, and never take on a bigger loan that you think you can reasonably handle.

How do you handle your debt?


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