10 Ways to Overcome Debt in Your Business

Last updated on August 14th, 2023 at 08:03 pm


In finance, debt is typically money that someone (the debtor) owes another party (the creditor). It is an obligation that requires the debtor to fulfil in paying the creditor.

For an entrepreneur, debt may be unavoidable at a point, especially during a challenging moment. But too much debt can pull you back from achieving your goal. In this post, we will explain ways to stay out of debt in your business.

Why debt in business?

A business loan is purposely designed for startups by financial institutions to cater for the needs of entrepreneurs; to finance and implement their business ideas.


To this end, the loan has helped thousands of emerging businesses around the world to purchase equipment, hire new employees, and expand production.

In the United States, the average debt load of entrepreneurs is said to be $195,000 compared to consumers, averaging $96,000.

It means small business owners in the U.S. “have higher monthly payment obligations with an average payment of $2,032 compared to $954 for consumers” a 2016 study by Experian says..

Overcoming Debt in Business

Incurring a heavy payment obligation every month can pull back your business growth. If you are able to eliminate or drastically reduce debt, you will be able to save more and divert the money to expand. To get things done the right way, below are the key ways to eliminate business debt:

Don’t live beyond your income

If your business brings in $1,500 in monthly revenue, but what you do is lavishly spend your income and wait till the next paying day to get things done, then eliminating debt might be difficult.

If spending your revenue has become a habit, you are most definitely going to be forced to take a loan to meet emergency needs.

For instance, if you manage a website for your home-based business, what happens if you need to upgrade or money to address a security breach on your site?

Eliminate what you don’t need. Cut your expenses. If you live in a 3-bedroom flat whose housing cost is higher than what you can afford, consider taking a bedroom apartment to save more.

To completely eliminate debt in your business, don’t live to express anyone. Don’t live beyond your means. Don’t live beyond your business income. Cut down spending on shopping. You have to save for the rainy days.

Set a saving goal

Setting savings goals and duly working to implement such goals is very important in staying out of debt. The goal is a pushing factor to get things that seem to be tasking done.

One of the ways to achieve this is by starting small. If $100 is something you can comfortably save after all expenses at the end of every month, it is going to add up by the end of the year.

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As you make more in revenue, you can increase your target and try to track you’re your progress to see closer you are to your goal encourages you to continue.

Saving as little as $1 at the end of the week is better than piling up debt. The fact that you’re able to save means you are making a progress, regardless of how small it is.

Have a budget

In entrepreneurship, a budget is a plan a business owner writes down to serve as a guide of how they will spend at end of every month or year. It helps them keep track of expenses over a period of time.

A budget helps an entrepreneur to make sure they have enough money in the reserve to cater for business needs. Failure to have a budget and sticking by it may push out to run out of money and forced to take p another loan.

 he will spend A big reason why you can’t save money is that you don’t have a plan for your money. Don’t feel bad, I can’t save money either if I don’t budget. Without a budget, it is difficult to keep track of your money.

You are able to manage your money better when you know where it is going. Budgeting makes it easy to see your income in relation to your expenses and to determine how much you are able to save. Having a budget also allows you to see where you can cut back on spending and save instead.

To switch from passively expending money to actively managing your finances, create a budget that fits your needs. Make a list of all of your income and expenses and the amounts of each.

Don’t forget to include savings in your budget as well. Creating a plan for your money puts you in control and is an important step in being able to save money consistently.

Reduce the number of credit cards

Experts at the American Consumer Credit recommend that reducing the number of credit cards available to an entrepreneur can help cut the chances of piling up debt.

Add services to earn more

Your startup needs at least 99% of your attention. You need to nurture your startup into a bigger business. And it could be challenging at the beginning, especially when you are the planner, chief executive, chief account and sale person.

What happens if the cost of managing your business is higher than the income? This can happen when the circumstances are beyond your control.

According to the available data on embroker.com, about 90 per cent of new businesses fail. The first year in business for an entrepreneur is tough thereby making 10% of them run out of business within this period.

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Most of the failure that happens during years two through five are because of the cost of running the business compared to the revenue.

Some startups had no choice but to take loans to meet other needs, but how can you prevent this from happening to your business?

If your major source of income is earnings from ads on your site, you can begin to promote products on your site to get a commission from sales.

If wedding planning is the only service you offer on your site, create content around marriage, and weddings and think of monetizing your content to earn more revenue from your content.

By adding additional services, you are able to jack up your income to take care of other things. Affiliate is one of the passive incomes you can try.

Have an emergency fund

One important way to avoid debt in your business is by setting up an emergency fund. Wondering what an emergency fund can boost your confidence in business?

An emergency fund is a cash reserve set aside to take care of unplanned expenses that might incur in the course of running a business. It is called an emergency fund because it is your financial back up in times of unexpected financial responsibilities.

As an entrepreneur, you need to have an emergency fund for you to eliminate the push of taking a loan to meet financial obligations.

Family, big companies, and small businesses need an emergency fund since no one knows when unexpected expenses would come up. You need to prepare for them to avoid dipping your hands into money that should serve other purposes in business growth.

Reduce running cost

How much do you spend on call cards every week? How much do you spend on data? Now, one smart way to reduce how much it is expended on call cards is to use the messaging app for calls, this way, you are only paying for the data instead of purchasing a call card when you can easily save more.

You can cut the cost of buying flight tickets and hotel bookings by holding meetings with your partner on Zoom, Meet, and Skype.

Track credit card spending

Do you know you might be incurring expenses without knowing it? A security breach on your credit card might be the culprit due to some illegal activities of bad guys online.

One way to keep this in check is to keep track of payments on your credit card. This is important not just to avoid accidental overspending, it will also help you to know what you spend and what you didn’t. this can go a long way in helping to eliminate debt in your business.

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Avoid an impulse purchase

If you are fond of buying what didn’t plan to purchase, you are an impulse buyer. And you need to put this consumer behavior in check if actually want to overcome debt in your business.

Buying nice things for yourself is nice, after all, your efforts generated the money, but being a compulsive buyer is injurious to your business finance.

One way to solve the problem is to have a list of what to buy and stick with what is on the list when you visit a grocery store.

Manage your business from home

During and after the pandemic, the number of home-based businesses increased in countries where data matters. For instance, in the United States, there are close to 15 million home-based businesses out of 30.2 million small businesses, says Fundera which relied on data from U.S. Small Business Administration.

And there has been an increase in the number of applications for licenses by entrepreneurs who plan to establish a home-based venture in the U.S.

In the United Kingdom, there is also a boom in the number of businesses that are managed from home. A 2014 report by the government of the U.K. says there were at least 2.9 million entrepreneurs who have home-based businesses, according to BIS Business Population Estimates and BIS Small Business Survey. That number must have skyrocketed after the COVID-19 pandemic.

What does this mean for an entrepreneur?

As a startup, one way to reduce or possibly eliminate debt is by managing your business from home instead of paying for monthly office space. You can save a lot of money at the end of year.

According to a global real estate company, Jones Lang LaSalle Incorporated (JLL), an average cost of a square foot of an office per year in Houston is $31 in the quarter of 2021. If you are renting an office in the central district of the city, you must be ready to even pay more.

So, if your business if what you can completely manage online, don’t be tempted to rent an office unless you want to employ more employees who need to work at the office. Or you’ve made more money that can accommodate office rent expenses and maintenance.

Wrapping up:

If you’re determined to overcome the temptation of debt in your business, you need to change your spending habits. Apart from avoiding debt, you will be able to save more.

Saving more opens new business opportunities and expansion. Inculcate financial discipline!

Further Reading:

  1. American Consumer Credit Counselling. “How To Avoid Debt”. consumercredit.com
  2. Rob Bertma (January 30, 2022). “Why can’t I save money? 7 reasons (and how to fix them).” familybudgetexpert.com
  3. Industrial Strategy (August 15, 2014). “Backing for home-based business boom”. gov.uk

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