4 tips for small-business owners paying down pandemic debt


After more than a year of navigating lockdowns, mandates and COVID-19 protocols, small-business owners are starting to see a light at the end of the tunnel. But the debt many needed to take on to weather the pandemic still casts an ominous shadow.

In 2020, 79% of small employer firms (up to 499 employees) reported having outstanding debt, up from 71% in 2019, according to a February 2021 report by the Federal Reserve Banks. Of the firms that applied for financing, 58% said they did so to cover operating expenses like rent and payroll, compared with 43% in 2019.

Paying down this pandemic debt can help business owners rebuild their companies. The following tips can help you eliminate your business debt faster, while saving money on costly interest in the process.


Being strategic about your debt will help you pay it off more quickly, says Chris Woods, founder of LifePoint Financial Group, a financial planning firm in Alexandria, Virginia.

“People tend to just throw money at (debt). Maybe they’ll pay a little bit extra this month or that month,” Woods says. The better approach? Create a detailed repayment plan.

Take a full accounting of what you owe, including interest rates and repayment terms for any business loans or credit card debt you’ve accumulated. Note grace periods, deadlines and action items, such as applying for forgiveness if you received a Paycheck Protection Program loan.

Then, set a reasonable (read: achievable) timeline to pay off your debts and start picking them off one by one. If you’re juggling multiple loans or credit cards, funnel any extra payments to the debt with the highest interest rate, says Zach Reece, owner and chief operating officer of Colony Roofers in Atlanta.

“This is your most expensive debt and you’ll get the highest cost savings from paying this debt down most aggressively,” notes Reece, who is also a certified public accountant.


“You can’t pay down debt with money you don’t have,” Reece says.

There are two ways to find more money: Trim your budget or boost your income.

To jumpstart your revenue, reexamine your business model and look for opportunities to reach more customers or expand your sales footprint. You can also take steps to front-load your cash flow. Renegotiate contracts to request payment upfront or offer incentives to customers who can pay six or 12 months in advance.

To cut expenses, scrutinize your budget. Look at things like advertising, subscriptions, professional memberships and even office space. What can you cancel, pause or downsize?

“Operating leaner will help you buffer downturns and create more cash flow so you have space to pay down that debt,” says Ken Alozie, managing director of Greenwood Capital Advisors in Washington, D.C.


Make your debt less expensive by refinancing. Depending on your loan and business history, you may be able to access a better rate, a lower monthly payment or more favorable repayment terms. The same applies for any business credit card debt you accrued, Woods says.

“Look at opportunities to move that debt to another card or lender to have less interest accruing,” Woods says. “This is something everyone should look into, especially if you’ve been on time with your payments.”

Juggling multiple loans? Consolidate them into a single small-business loan, preferably with a lower interest rate and monthly payment. An added bonus: You’ll have just one payment to one lender.


Running a business can be all-consuming. Managing business debt can be, too. Doing both simultaneously? Something will likely give.

“A lot of (smaller businesses) are in survival mode and can forget that they’re managing a business and need to interact with clients and look for growth opportunities,” Alozie says.

Connect with your local Small Business Development Center or Community Development Corporation. You can also link up with a mentor through SCORE, a volunteer organization that offers free business mentorship.

These organizations keep tabs on developments — such as the many changes to PPP loans and rules — and send emails with tips, important deadlines and updates, freeing you up to focus on your business.

“Don’t feel like you need to do it by yourself. Plug into organizations that will help you stay on top of it,” says Alozie, who is also a certified business mentor with SCORE. “You’ll have more leverage, so you’re not out there on your own trying to keep up to date, while also trying to run a business out of the pandemic.”


This column was provided to The Associated Press by the personal finance website NerdWallet. Kelsey Sheehy is a writer at NerdWallet. Email: [email protected]. Twitter: @kelseylsheehy.


NerdWallet: 6 Ways to Manage Cash Flow for Your Business http://bit.ly/NerdWallet-manage-6-ways

Small Business Development Centers https://americassbdc.org/

SCORE https://www.score.org/

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