If your business had to take on more debt during the COVID-19 pandemic in order to survive, you’re not alone. A recent report noted that 74 percent of small business owners took on debt to offset COVID-19 financial losses.1 According to the Federal Reserve Banks 2021 Small Business Credit Survey report on employer firms, 79 percent of firms with employees had outstanding debt at the end of 2020, and that was excluding PPP loans, which would likely be forgiven. This figure is up from 71 percent in 2019.2

Paying down business debt resulting from the pandemic is a major step every small business should work toward for a healthy, operational cash-flow positive status. Following are six ways small businesses can work to pay down pandemic debt

1. Create a Payment Plan

Start by putting together an actionable plan that can give you a roadmap to ease your debt burden as time goes on. The remaining tips should be part of this plan, but knowing the strategies you're going to employ and having a timeline are good first steps.

2. Develop a Budget

Create a balanced budget that you can stick to. FreshBooks has a five-step approach to consider. These steps include: tallying your income sources, determining fixed costs, including variable expenses, predicting one-time spends, and putting it all together.

"Above all, once you have a clear sense of your profitability for the month, you can use it to make the right financial decisions for your small business moving forward," explains Deanna deBara at FreshBooks.3 "For example, if you realize you’re in the red and spending more than you earn, you might cut your spending and focus on finding new clients. Alternatively, if your income is significantly higher than your expenses, you might consider investing your profits back into your business (like investing in new software or equipment)."

3. Investigate New Revenue Streams

Brainstorm new ways to drive revenue, whether it's diversifying your product lineup, applying your existing processes to a different vertical, or expanding into markets.

When creating a new revenue stream, it is crucial to take inventory of your abilities and processes," says Noah Downs of American Pipeline Solutions.4 "Your new revenue stream should be closely aligned with your main offering that doesn’t subtract from your limited resources to ensure profitability. The key is to challenge how you look at various forms of waste and determine how to turn it into money!"

4. Consolidate Debt with a Loan

Consider exploring a small business loan option that will help you consolidate debt into one loan with a lower interest payment. This will make your debt easier to manage and easier to pay off. Monthly payments won't be as big of a blow to your cash flow. Talk to a representative from Nevada State Bank or explore your borrowing options here.5

5. Use Cash More Often

Sticking with cash as you pay off debt may help you rein in spending, since you're forced to consider cash flow rather than considering purchasing something that can be paid for at a later time.

6. Talk to Your Lenders

If you're still having trouble coming up with the money to make your payments as needed, talk with lenders to see about negotiating payments or debt settlements. You may be able to reduce the monthly payment as long as they see that you are willing to work with them to pay down your loan.

Debt can be difficult to overcome when a business has fallen on hard times, and the past year has certainly been full of those. You can, however, get your debt under control as your business carries on. Come up with a plan and see it through.

1. https://www.lendingtree.com/business/small/debt-covid-19-financial-losses-survey/

2. https://www.newyorkfed.org/medialibrary/media/smallbusiness/2021/SBCS-Employer-Firms-Report-2021

3. https://www.freshbooks.com/blog/the-5-step-plan-to-creating-a-balanced-business-budget

4. https://www.score.org/blog/8-ways-develop-create-new-revenue-streams-small-business

5. Subject to credit approval. Terms and conditions apply. See a banker for details.