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How Much Debt Does the Average Small Business Carry?

By Spodek Law Group | February 20, 2024

How Much Debt Does the Average Small Business Carry?

Small businesses are the backbone of the American economy, making up 99.9% of all businesses in the United States. However, launching and running a successful small business is no easy feat. One of the biggest financial challenges facing small business owners is managing debt. But just how much debt does the average small business carry? Let’s take a closer look.

Average Small Business Debt

According to a 2021 study by Nav, the average small business carries $195,957 in debt. This number varies widely though depending on factors like industry, business size, years in business, and more. For example, the average debt carried by businesses in the accommodation and food services industry is $149,900 compared to $338,700 for businesses in the healthcare and social assistance industry.

When it comes to business size, unsurprisingly larger businesses tend to carry more debt on average:

  • Businesses with 0 employees (self-employed): $30,977 average debt
  • Businesses with 1-4 employees: $82,097 average debt
  • Businesses with 5-9 employees: $158,629 average debt
  • Businesses with 10-19 employees: $230,977 average debt
  • Businesses with 20-49 employees: $358,633 average debt

As for years in business, older businesses tend to carry substantially higher debt loads:

  • Less than 2 years in business: $68,702 average debt
  • 2-4 years in business: $117,450 average debt
  • 5-9 years in business: $192,333 average debt
  • 10+ years in business: $332,130 average debt

Types of Small Business Debt

There are several common sources of debt financing that small businesses utilize:


Loans allow small businesses to borrow money that has to be repaid over time with interest. Some popular small business loan options include:

  • SBA loans – Offered by banks and credit unions, these loans are partially guaranteed by the U.S. Small Business Administration.
  • Business lines of credit – Revolving credit lines that allow businesses to access funds as needed.
  • Term loans – Installment loans with fixed monthly payments made over 3-10 years.
  • Equipment financing – Funding to purchase necessary equipment and machinery.
  • Invoice factoring – Borrowing against the value of unpaid customer invoices.

According to the 2021 Nav debt study, 44% of small business debt is owed on loans. The average small business carries $86,420 in loan debt.

Credit Cards

Credit cards are another major source of debt financing for many small businesses. They allow businesses to spread out payments over time, taking advantage of 30-60 day grace periods. The Nav study found that 31% of small business debt is carried on credit cards, with the average small business owing $60,646 in credit card debt.

Personal Funds

Some small business owners also use personal credit cards, home equity loans, personal loans, and personal savings to help initially fund their business. On average, small business owners invest $10,000 of their own money when starting a business. Ongoing personal contributions and loans to support the business are also common.

Why Do Small Businesses Take on Debt?

There are many important reasons why small businesses take on debt, including:

  • Funding growth – Loans and credit can provide working capital to expand inventory, hire new employees, move into larger spaces, invest in equipment, and more.
  • Smoothing cash flow – Borrowing helps businesses manage fluctuations in income and expenses.
  • Covering operating costs – Day-to-day expenses like payroll, rent, supplies and more often require debt financing.
  • Recovering from emergencies – Whether due to a recession, natural disaster, or family emergency, debt can help business owners get by in difficult times.

Taking on debt is not inherently bad. When managed properly, debt allows businesses to invest in future growth and weather inevitable ups and downs. However, becoming overleveraged can put businesses in financial risk if they are unable to make loan and credit card payments. Finding the right balance is key for any small business owner.

Managing and Paying Down Small Business Debt

Carrying high debt levels over the long run is rarely sustainable for small businesses. The good news is that there are strategies businesses can use to pay down debt:

  • Using profits wisely – Set a portion of profits aside to pay down debts rather than re-investing everything back into the business.
  • Cutting expenses – Review budgets for any non-essential expenses that can be reduced to free up more cash for debt payments.
  • Refinancing – Explore if any existing debts can be refinanced at lower interest rates to reduce monthly payments.
  • Using windfalls – Use any unexpected influxes of cash such as tax refunds or lawsuit settlements to immediately pay down debts.
  • Seeking investors – Bringing on investors through selling shares or forming partnerships can provide an influx of cash to pay off expensive debts.

Getting professional help is recommended for small business owners struggling with high debt burdens. Meeting with a small business accountant or financial advisor can provide guidance on budgeting, cash flow management, reducing expenses, structuring debt, and more.


Managing debt is a crucial aspect of running a successful small business. On average, small businesses in the U.S. carry just under $200,000 in debt. But debt levels vary greatly depending on the age and size of the business along with factors like industry. Small business loans, credit cards, and personal contributions are some of the most common sources of debt.

While debt allows businesses to fund growth and manage cash flow, becoming overleveraged can put companies at financial risk. Carefully monitoring cash flow, cutting unnecessary expenses, refinancing debt when possible, and seeking professional accounting and financial planning assistance can help small business owners pay down debts and achieve sustainability.


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