4 tips for small business owners to pay off their pandemic debt


After more than a year of navigating COVID-19 lockdowns, warrants and protocols, small business owners are starting to see a light at the end of the tunnel. But the debt that many needed to deal with the pandemic still casts a worrying shadow.

In 2020, 79% of small business employers (up to 499 employees) reported having unpaid debt, up from 71% in 2019, according to a February 2021 report from the Federal Reserve Bank. Of the companies that applied for funding, 58% said they did so to cover operating expenses such as rent and payroll, up from 43% in 2019.

Paying off this pandemic debt can help business owners rebuild their businesses. The following tips can help you get rid of debt from your business faster, while saving money on expensive interest in the process.


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

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

Do full accounting of what you owe, including interest rates and repayment terms for any business loans or credit card debt you’ve accrued. Write down grace periods, deadlines, and what to do, such as asking for forgiveness if you received a Paycheck Protection Program loan.

Then set a reasonable (read: achievable) timeframe to pay off your debts and start taking them out one by one. If you’re juggling multiple loans or credit cards, shift any additional payments to the debt with the highest interest rate, says Zach Reece, owner and COO of Colony Roofers in Atlanta.

“This is your most expensive debt and you’ll get the greatest savings by paying off that debt in the most aggressive way,” notes Reece, who is also a chartered accountant.


“You can’t pay off your debts with money you don’t have,” Reece says.

There are two ways to find more money: Reduce your budget or increase your income.

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

To reduce expenses, take a look at your budget. Look at things like advertising, subscriptions, professional memberships, and even office space. What can you cancel, suspend or downsize?

“Lean operations will help you cushion downturns and create more cash flow so you have enough room to pay off that debt,” says Ken Alozie, managing director of Greenwood Capital Advisors in Washington, DC.


Make your debt cheaper by refinancing. Depending on your loan and your business history, you may be able to access a better rate, lower monthly payment, or more favorable repayment terms. The same goes for any business credit card debt you’ve racked up, says Woods.

“Look at the possibilities of transferring this debt to another card or to another lender so that you have less interest accruing,” says Woods. “This is something everyone should consider, especially if you have kept your payments on time.”

Juggling multiple loans? Consolidate them into one small business loan, preferably with a lower interest rate and monthly payment. An added bonus: you will only have one payment to a lender.


Running a business can be tedious. So can corporate debt management. Do both simultaneously? Something will probably give way.

“Many (small businesses) are in survival mode and may forget that they are running a business and have to interact with customers and look for growth opportunities,” says Alozie.

Connect with your small business development center or community development corporation. You can also connect with a mentor through SCORE, a volunteer organization that offers free business mentoring.

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, allowing you to focus on your business.

“Don’t feel like you have to do it yourself. Connect with organizations that will help you stay on top, ”says Alozie, who is also a Certified Business Mentor at SCORE. “You will have more leverage, so you are not alone in 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 NerdWallet personal finance website. Kelsey Sheehy is a writer at NerdWallet. Email: [email protected] Twitter: @kelseylsheehy.


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