With lenders tightening the reins on borrowers and prices for everything from materials to insurance on the rise, many small-business owners are straining under the weight of growing debt.

Here are some ways small businesses can dig themselves out of debt without filing for bankruptcy:

1. Cut unnecessary costs and free up cash
Identify the parts of the business that got the company into debt in the first place and attack them head on. If customers aren’t paying on time or your expenses are too high, consider ramping up debtor collection efforts and ditching unnecessary expenses such as office space or costly phone systems. Another way to free up cash: Sell off unused equipment, expensive motor vehicles or sub-letting unused office or warehouse space.

2. Revisit the budget
If the debt keeps piling up, then it probably means the company’s current budget isn’t really working out. Create a budget based on the business’s current financial situation. Make sure your business’s revenues can more than cover your fixed monthly costs like rent and utility bills. Then, allot a portion of the budget for variable costs, such as manufacturing materials and then devote much of what’s left to paying down their debts. If you have credit-card debt, for example, make sure you pay off more than just the minimum. Otherwise your debt will keep building and it’ll take years to pay off. An inexpensive way to help you keep track of your budget is to use accounting software like Intuit’s QuickBooks or other small business software.

3. Prioritise debt payments
Tackle the business’s highest-interest rate debt first, which most likely will mean concentrating your energies on paying down credit cards. However, if you’ve personally guaranteed any of your business’s debt–meaning, if a creditor or supplier can come after your personal assets if you default–make sure paying off those debts become a high priority as well.

4. Speak with creditors
Tell your creditors the financial situation you’re in and the hardship the business is going through. Then, ask if they have a hardship plan that may provide better payment terms. If the creditor doesn’t offer one, request a payment plan or a reduced settlement amount. Make it clear–without being demanding–that “the less they’re willing to accept or the more they’re willing to reduce your debt, the faster you will pay them.” Just make sure you can fulfill your end of the bargain. The worst thing a business owner can do is set up a repayment plan with a creditor and default.

5. Consolidate your loans
Consolidating your loans into one payment allows you to reduce monthly costs without harming your credit. The best-case scenario is consolidating several shorter-term loans into one long-term package. However always be cautious with professional so called debt-management companies perhaps best to first sound out what your Bank can offer.

6. Seek advice
Negotiating with creditors can be a harrowing experience. So consider seeking professional advice where possible.

If you need help or advice on getting your business out of debt, please call us on 07947 052515