How to pay off business debt

Many entrepreneurs are looking to reduce their business debt quickly right now.

That’s a smart move. Once you’ve got enough cash on hand to take care of unexpected emergencies at your business, reducing debt payments can help you lower your overhead.

So how do you conquer business debt? Do it brick by brick.

Check out all the answers from our credit card experts.

Ask Elaine a question.

Take stock

Many businesses have multiple sources of debt, between business credit cards, business loans and trade credit from stores. Make a list of any debts you’ve accumulated and their interest rates so you can make an informed decision about which ones to pay off first.

When it comes to interest rates, don’t just go by memory. Check your bills. Sometimes, credit card companies raise the rates after just one late payment, and if you’ve been caught up in business activities the past few months, there may be some surprises.

See related: 10 things to know about business credit cards

Lower your interest rates

You’ll be able to make more headway on paying down any credit card debt if you aren’t paying any interest or reduce the amount you are paying in interest.

Look to see if you can qualify for 0% interest balance transfer deals for cards where you are paying interest. The average business credit card interest rate is 14.03%, so prioritize balance transfers for any cards with interest above that.

If you’ve borrowed from alternative lenders, chances are you are paying higher interest rates than you would at a bank, whether you go for a standard bank loan or one backed by the SBA.

If you are able to qualify for a bank loan, consider refinancing any alternative debt, so you can lower the amount of interest you are paying. Bear in mind that you will usually need to personally guarantee a bank loan, but not alternative financing. Not everyone is comfortable with doing so.

Choose your debt-reduction strategy

Many owners find it makes sense to pay off the highest-interest debts first, to minimize what they pay in interest, but others prefer the “snowball” approach, where they pay down the cards with the smallest balances so they are paying off fewer cards. What’s important is that you actually pay them down, so choose the approach that will keep you most motivated.

See related: What to do if you can’t pay your business credit card bill

Keep your eye on credit card deals

As you reduce your debt, your credit utilization will get lower, and your credit score may improve. That may enable you to qualify for deals that you might not have been able to get six months or a year ago. Put a note in your calendar to check business credit card deals once a month to see if there are any attractive new ones for which you can qualify.

Reduce future debt

Check any recurring payments that are appearing on your credit card statements to make sure you’re still using the services you are paying for. Cancel any services you no longer use. Eliminating even one $100-a-month service will save you $1,200 in a year.

Bottom line

In the end, the less you charge, the less you’ll have to pay back. Taking a mindful approach to spending can go a long way.