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Creating a Debt Repayment Plan for Your Small Business

Running a small business is no easy feat – the financial pressures, invoices, payroll, it can all pile up quickly. Suddenly, you find yourself drowning in debt. So, what do you do? How do you go about paying everything back? Here’s a no-nonsense guide on creating a solid debt repayment plan.

Step 1: Take Stock of Your Debts

First things first, you need a full picture of what you owe. Make a list of every single debt, including:

  • Credit cards
  • Business loans
  • Lines of credit
  • Taxes owed
  • Vendor bills

For each debt, note the total amount owed, minimum payment, interest rate, and due date. Don’t sugar coat it – this is reality staring you in the face. Knowing exactly how much you owe is critical.

Step 2: Prioritize Your Debts

Some debts are more pressing than others. Generally, you’ll want to prioritize debts by interest rate – tackle those high-interest cards and loans first, as they accrue interest the fastest. However, you may also need to consider:

  • Debts that have gone to collections
  • Loans with penalties for late payments
  • Vendors threatening to cut off supply

Actively communicating with creditors is key. They may be willing to negotiate interest rates or minimum payments if they know you’re working on paying them back systematically.

Step 3: Cut Expenses & Boost Income

With a clear list of debts prioritized, it’s time to aggressively cut costs and bring in more revenue to put towards repayment. Go line-by-line through your profit & loss statement – being brutally honest about what spending is essential or not. Consider:

  • Renegotiating rent & vendor contracts
  • Downsizing office space or inventory
  • Halting discretionary spending entirely
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On the revenue side, explore ways to immediately boost income, like promotions, new sales channels – anything to generate more cash flow. YOU MUST MAKE DEBT REPAYMENT THE TOP PRIORITY. Period.

Step 4: The Repayment Plan

Now for the plan itself. Based on your debt prioritization and newly-freed cash flow, allocate funds accordingly to debts each month – paying as much as you can towards the highest interest/most pressing obligation while maintaining minimum payments on others.

Consider using the “debt snowball” method, where you completely pay off the smallest debts first – celebrating small wins that can help motivate you. Just look out for prepayment penalties.

Step 5: Stick to It & Stay the Course

Paying down debt is a marathon, not a sprint. The hardest part is following through on your plan month after month. You MUST stay disciplined:

  • No deviating from the strategy
  • No lifestyle creep as debts get paid
  • No new unnecessary spending

Remain hyper-focused. Cross off each debt as it’sRepaiD. Reassess the plan regularly and adjust as needed based on your actual vs. projected income and expenses. Getting out of debt IS possible, but only through rigorous execution.

In Closing

Small business debt can feel insurmountable. But by taking a clear-eyed assessment, prioritizing intelligently, drastically cutting costs, boosting income, and obsessively following a repayment plan – you can dig yourself out, bit by bit. Stay focused, stay motivated, and never lose sight of the debt-free finish line.

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