Managing small business credit

Managing your business's credit is within reach. Here are tips to help.


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Published: July 14, 2016
Updated: January 12, 2017

Perhaps you've taken on a line of credit. Maybe you have a few credit cards and you're using those to make purchases and run your business.

Sometimes additional credit is needed to keep your business moving and growing, and you take it on because you've got enough revenue and enough cash to manage it.

If you've taken on too much debt and you need to reduce your debt — here are some tips.

Make a list of everything that you owe, the credit cards and your loans. You might target one credit card and pay additional dollars to the principal amount of that credit card so you can bring one credit card down at a time. Then, once you've paid off that credit card, you can take the amount that you were using to pay off that first card and apply it directly to the next credit card. This creates a snowball effect, as you pay down debt after debt. It takes a little discipline, but you can get debt-free this way.

Another way to deal with debt is to work with your vendors. When you talk to your vendors, be upfront about the situation: Were your prices too low? Did you sell a job at an unreasonable selling price? Work out a realistic payback program. Then you can add that dollar amount, an agreed-upon dollar amount, to your list of outstanding credit obligations and you can pay that debt down just like you would another credit card.

Other ways to manage credit: Get those accounts receivable now. In fact, try to eliminate accounts receivable altogether.

Another way to consider reducing your debt is to rethink the space that you're using. Is it possible to downsize? If you can tighten up and maybe move your business back to the home temporarily or into a smaller facility, you may save a chunk of change, and you could use those saved dollars to pay down your debt.

As a small business owner, credit can be a luxury, maybe even a necessity to grow your business. Using credit too much can create some challenges.

Sit with your banker. Review your balance sheet and your budget and your plans for your business. Together, you can come up with ways to use credit wisely and grow your business.