Credit card debt takes a toll on everyone. If you’re a small business owner facing credit card debt, you’ve likely come to find debt impacts every business relationship you have and every business decision you make.

Even worse, credit card debt can easily threaten your business’ ability to stay alive. With so much at stake, it’s easy to become overwhelmed.

Small Business Debt Management for Small Business Owners

Here’s four easy steps you can take to get relief from credit card debt once and for all, while improving the financial health of your small business.

Determine the Cause

Every business goes through ups and downs. In business, it’s not the end of the world if you have to lean on your plastic once in a while so long as you can pay it off in short order. But if you continually find yourself in debt over a prolonged period, there is a systemic problem that must be addressed.

If you’re chronically in debt, chances are your sales are too low, your costs are too high or both. It’s just math. The thing is, you need to find out exactly what the problem is before you take another step. The reason this discovery is so important is that if you don’t solve the core problem, you’ll soon find yourself back in the same debt sinkhole you are in now – even if you pay off the debt.

Before you implement any potential solutions, meet with at least three successful business owners or leaders you trust and run your ideas by them. Remember, and I say this with all due respect and love, your best thinking is what got you into this pickle in the first place.

There is no shame in asking for a second, third or fourth opinion, especially since other people will have different perceptions of your finances and business operations and may see a simpler, cheaper or faster solution.

If it turns out that there is no viable solution, your best option might be to shift gears or even close the business before putting more time, energy and resources into it. If this is the unfortunate result of your inquiry, it’s better to know now than later. The last thing you want is to dig your debt ditch even deeper.

Reduce your Costs

Once you’ve discovered the root of your debt issue, it’s time to begin implementing solutions.
Your first area of focus is to find no or low-cost debt options to replace the credit card debt you’ve racked up. In other words, you want to find a way to slash your interest costs in order to put more money towards paying off the principal you owe.

Luckily, there are a number of ways to do this.

• Zero-Interest Balance Transfer Credit Card

One option is to take advantage of those “zero interest rate credit card” offers you get in the mail. If you open up one of those cards, you’ll be able to transfer your balance to the new card and pay no interest for six to 18 months.

If that isn’t enough time to pay off the debt, keep rolling it over to new cards at the zero interest rate. Just make sure that when you do this, you pay off a good chunk of that balance. If you reduce your rate but fail to take advantage of the opportunity to pay off the debt, your situation won’t improve and could potentially get worse.

• Refinance with the Help of Friends or Family

Your next option is to refinance the debt with friends or family. Instead of paying 12 percent or more to a credit card company, your loved ones might take on the debt at 5 percent interest.  This cuts your costs way down and provides a good return to your supporters at the same time.

Caution: Only ask a friend or family member for a loan if you are 100 percent confident you can and will afford to make payments to them.

• Peer-to-Peer Lending

A third path is to use peer-to-peer lenders to pay off your cards and refinance at lower cost interest.
No matter how you do it, focus on finding ways to drastically reduce your cost of debt and use that savings to pay your debt off faster.

Tip: Once you pay off those cards, don’t close them out. Having credit lines with zero balances looks great on your credit report and is a fantastic way to increase your credit score as you lower your debt-to-credit ratio.

Deploy the Snowball Method

Now that you’ve reduced your interest costs to the bare minimum, put everything you have towards paying off the highest-cost debt first.  If that means making minimum payments on the other cards, that’s fine.

Use Dave Ramsey’s “debt payment snowball method” to evaporate your debt.

By paying off your highest debt first and then repeating this process with the next highest cost debt (applying as much cash as you possibly can towards each debt) you’ll be amazed how quickly your debt melts.

Never Allow this to Happen Again

You can see that getting out of debt for small business owners isn’t easy. After you go through all this effort, please make sure you don’t have to go through the same exercise again.

That’s why determining the root of your debt is so important. Make sure you understand and fix the core problem(s) that created your debt problem before doing anything else. If you do that, you’ll likely never have to worry about high cost credit card debt again.