Debt doesn’t have to be a terrifying four letter word for your business. Debt is like any other tool. If you know how to use it, debt can benefit your business. But if you don’t use it wisely it can quickly get out of control. I’ve seen home service owners scramble to cover costs they didn’t even know were piling up. I want to teach you to understand what kind of debt you’re carrying and how it affects your business value, so you can stay in or take back control. In this post, we’ll walk through some clear, practical steps to get a handle on your numbers and make debt work for you—not against you.
Understanding the Two Types of Business Debt
All debt isn’t created equal. There’s long-term debt—like the financing you used to buy a work truck or a big piece of equipment—and short-term debt, which comes from juggling bills, buying inventory, or covering a seasonal slowdown with a line of credit. Long-term business debt shows up on your balance sheet and affects how banks see your borrowing potential. When you apply for a loan, lenders often start with your EBITDA (that’s your earnings before interest, taxes, depreciation, and amortization), multiply it, and subtract that long-term debt to get your business’s value. If you don’t know which debt is which, you can’t manage either well.
Your Fast Money Formula for Cash Flow Clarity
Here’s a simple tool I use with clients to check short-term debt exposure. We add up inventory and accounts receivable, then subtract accounts payable. That total gives a snapshot of how much cash you’ve got tied up—or at risk. If your short-term business debt is climbing but your receivables aren’t coming in fast enough, that’s a warning light. You’ve got to keep a close eye on how fast money is moving through your business. Otherwise, what looks like a good month on paper could still leave you scrambling for cash.
Using Color Codes to Manage Business Debt
Let’s make this easy. I like color-coding debt in a spreadsheet—green for debt on track, yellow for debt that needs a second look, and red for anything overdue or ignored. It’s not fancy, but it works. When you check it every month, you stay ahead of surprises and feel more confident about where you stand. Even if you’re not a numbers person, visual tools like this help you spot patterns in your business debt before they turn into real problems.
What Business Debt Says About Your Company’s Health
The amount and type of debt you carry tells a story about how your business runs. Are you borrowing for growth or just to stay afloat? Are you managing your cash flow or reacting to crises? Investors, lenders, and even potential buyers will look at your debt levels as a sign of how well you’re managing the business. That’s why it’s so important to separate out short-term versus long-term business debt—and keep an eye on how each affects your bottom line.
How to Pay Off Business Debt Without Stress
The key is building a payoff system you can actually stick to. That might mean scheduling weekly payments, cutting off old credit cards, or shifting purchases back to cash. The goal is to stay intentional and consistent. When you stop avoiding the debt and start managing it, you’ll feel the stress lift and see profits rise. Small changes, made regularly, can add up to big results when it comes to clearing business debt.
When to Ask for Help With Your Debt
There’s no shame in needing support. Business debt can be confusing, especially when it’s spread across vendors, banks, and different departments. If you’re not sure how to separate it, calculate it, or build a plan to pay it off, that’s where I come in. I help home service owners, just like you, get a clear picture of their numbers and finally feel in control again. Sometimes a second set of eyes can spot things you’ve been missing.
Making Business Debt Work for You
Here’s the bottom line: debt isn’t the problem. Not knowing where it’s going or how it’s affecting your cash flow is. When you start tracking your business debt each month, using simple formulas and visual tools, you’ll stop guessing and start making smarter decisions. You deserve to take home more of what you earn—and that starts by facing your numbers head-on.
You can book a profit impact call with me where I can save you a minimum of 50K as we go over 12 main areas of your business!
