7 debt management tips for SMEs

Business debt doesn’t have to be a burden, but it can cause real problems if it’s not managed carefully. There are several factors to consider before taking on debt, and it’s important to develop a debt management strategy before signing on the dotted line.

Here are 7 practical tips to help you get your debt management procedures in place:

1. Keep a prioritised list of your creditors

When trying to manage debt, you can easily lose track of what you owe. When that happens, it’s all too easy to miss repayments. One way to stay on top of your obligations is to keep a prioritised spreadsheet of your creditors—ordered by due dates, debt size, or interest rates.

Once you’ve got a clear view of what you owe and to whom, you can decide on the most cost-effective strategy for paying off your debts. For instance, you might choose to tackle the smallest debts first (the “snowball method”) or focus on those with the highest interest rates (the “avalanche method”).

2. Look for the lowest rate—not just convenience

There are a wide variety of lending products available to SMEs. Settling for a business credit card may be convenient, but it’s not always the most cost-effective way of reaching your business goals. Take the time to compare interest rates, and you might be surprised by how much you can save by choosing the right product for your needs.

3. Consolidate debt

Debt consolidation is a strategy where you combine multiple debts (such as a business credit card, a line of credit or an unsecured loan) into a single, lower-interest loan that allows you to manage your debt through a single monthly payment. This approach comes with both upsides and risks:

Positives

• Lower interest rate. Generally, when you consolidate your debt, you’re able to secure a lower interest rate than you would by leaving your debts as they are.
• Simplified repayment. The purpose of consolidation is to combine multiple debts into one manageable payment. This reduces the time and stress spent juggling due dates, interest rates, and different creditors.
• Smaller monthly outflow. Due to the lower interest rate and single repayment, your overall cash outflow for the month will be smaller than before.

Negatives

• Temptation to overspend. Once everything is bundled into a single loan, it's easy to fall into the mindset that you can spend more and use the business credit card, thereby incurring further debt.
• Extended loan term. Lenders may increase the term length in exchange for the lower interest rate, which can keep you in debt for longer.
• Higher overall cost. If you extend the repayment term, you may pay more than you would have originally—which is where debt consolidation benefits the lender.

4. Create a strong business budget

By creating a budget that maps out your forecasted expenses (with allowances for unexpected shocks), you'll be able to show where your money is—and where it will be in the future. This can help you stay on top of debt repayments and avoid overcommitting.

5. Focus on brand-building

Some marketing, brand-building, and profile-raising activities take time and it can be difficult to measure their ‘return on investment’. However, just because they’re hard to quantify doesn’t mean they’re not valuable.

Finding new ways to retain customers and attract new ones can secure your revenue in the longer term. Whether it's branching into social media marketing, refreshing your website, launching an Instagram account, or even dropping flyers around your local area, all these activities can help to ensure that your business stays front of mind when a customer needs your service.

6. Think long-term

Setting up an emergency business account might sound like overkill when business is good—but that’s actually the ideal time to do it. By putting aside a portion of your business profits each month into a reserve account, you’re protecting yourself from the inevitable ups and downs that come with running a business.

Of course, this isn't a complete strategy, but having a cash buffer gives you flexibility—and peace of mind—when things slow down.

7. Manage your debt-to-equity ratio

Your business’s debt-to-equity ratio is easy to calculate: simply add up your total liabilities (debt), then divide that by your equity (the money you’ve invested in the business). This number is important, especially when applying for finance, as many lenders will use it to assess your financial health.

Business debt doesn’t have to be stressful. With these tips in your small business toolkit, you can take control of your debts—and plan more confidently for 2025 and beyond.