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Using Debt Management Programs to Pay Off Business Debt

By Spodek Law Group | February 20, 2024




Using Debt Management Programs to Get Your Business Out of Debt

Dealing with business debt can be really stressful. Like, trying to manage payments across multiple loans or credit cards while also keeping your business running is no joke. But there are options out there to help get things under control. Debt management programs can provide a way for businesses to consolidate debts and set up affordable payment plans. Let’s take a closer look at how these programs work and if they might be a good fit for your business.

What is a Debt Management Program?

A debt management program (DMP) is basically a consolidation and repayment plan administered by a credit counseling agency. The agency works on your behalf to negotiate with your creditors and collectors to reduce interest rates and create a single monthly payment. The idea is that by combining multiple debts into one lower payment, it becomes more manageable to pay off over time.

Most debt management programs are designed for consumers struggling with personal credit card debt. But there are services catering specifically to small business owners looking to tackle commercial debt as well. The process is largely the same, bringing together business loans, lines of credit, vendor accounts, etc. under a unified repayment plan with better terms.

How Do Business Debt Management Programs Work?

The first step is to connect with a reputable credit counseling agency that offers commercial DMPs. They’ll go over your financial situation in detail, including factors like:

  • Total current debts owed
  • Interest rates and repayment terms for each debt
  • Your business’s income and ability to make monthly payments

The counselors use this information to give you advice and create proposals for debt repayment plans. They’ll negotiate with your creditors to possibly lower interest rates or waive certain fees. The goal is to come up with a single payment amount that covers all your debts on better terms over 3-5 years.

Most business debt management programs charge a startup fee plus monthly service fees while you’re enrolled. The monthly DMP payment gets disbursed across your different accounts according to the negotiated terms. As long as you stick to schedule with payments, the program does all the work of managing the debts for you.

Benefits for Small Businesses

There are a few key ways a DMP can help struggling business owners:

Lower Interest Rates – Creditors may agree to reduce rates, letting you pay debts faster.

Consolidate Payments – Combine multiple loan/credit payments into one monthly amount.

Establish Affordable Payments – Customize payments to fit your budget over several years.

Avoid Bankruptcy – Get time to pay back debt and avoid damaging your business’s credit.

Stop Collections – Get collectors to stop contacting you once enrolled in a program.

Improve Cash Flow – Free up operating capital by reducing debt payments each month.

For businesses facing high debts and tight cash flow, a DMP can be a lifeline. The programs don’t make debt disappear, but they can create breathing room and reduce the burden of payments each month.

What Types of Business Debt Can Be Managed?

Most debt management agencies work with all kinds of business financing accounts, including:

  • Business Credit Cards – Rework limits, rates, minimum payments
  • Commercial Loans – Renegotiate terms with lenders
  • Merchant Cash Advances – Lower repayment percentage rates
  • Equipment Leasing – Adjust lease periods and buyout terms
  • Outstanding Invoices – Coordinate payment plans for vendors
  • Personal Credit Used for Business – Consolidate these accounts also

The key is full transparency with the counselors on all current debts owed. They can then negotiate plans based on the full financial picture.

Some exceptions are secured debts like mortgages or auto loans which have collateral tied to them. Business tax debts also require special handling and payment plans directly with the IRS.

What to Look for in A Business Debt Relief Company

Choosing the right debt management agency is crucial – you’re trusting them to handle negotiations and payments for possibly years. Here are key credentials to look for:

  • Industry Experience – Long track record with business debt relief specifically
  • Transparency – Clearly explains process, risks, fees involved
  • Results – Proven experience negotiating with wide range of creditors
  • Customer Service – Responsive and empathetic staff to support you
  • Nonprofit Status – Focus on debt relief rather than profit margins
  • Certifications – Meets standards set by organizations like NFCC

Spending time vetting different agencies upfront ensures you choose one equipped to deal with your business’s specific debt situation.

Pros & Cons of Using a Business Debt Management Program

While DMPs offer many benefits, there are also downsides to weigh when considering such a program:


  • Lower interest rates & monthly payments
  • Consolidate multiple debts
  • Avoid bankruptcy and further credit damage
  • Overseen by credit counseling professionals
  • Stop collections calls and lawsuits


  • Credit score may drop initially when accounts get closed
  • Little flexibility to change terms once set
  • Late fees if miss consolidated payment
  • Payoff timeline may stretch 5+ years
  • Upfront and monthly service fees

As you can see, the pros mainly focus on consolidating debts into one manageable payment under better repayment terms negotiated on your behalf. But it requires discipline to stick to the customized plan, which could still take many years to fully pay off debts.

The decision ultimately comes down to your business’s financial circumstances and ability to regain stable footing given some debt relief through a management program.

Alternatives to Debt Management Programs

While DMPs offer one path to tackling business debts, a couple other options may better fit depending on your situation:

Debt Consolidation Loans – Taking out a new consolidated loan at a lower interest rate can simplify payments. But it requires good enough credit to qualify and borrowing additional funds.

Small Business Bankruptcy – Filing Chapter 7 or Chapter 11 bankruptcy resets business debts entirely through liquidation or reorganization. But bankruptcy severely damages commercial credit standing.

Debt Settlement – Hiring a debt settlement firm to negotiate lump-sum payoffs for a reduced percentage of what you owe. This hits credit scores hard and only works if you have available funds.

Every business faces unique debt circumstances, so it’s wise to explore multiple relief methods before committing to a solution. Speaking to credit counselors and attorneys can provide guidance on the pros and cons of each approach.

Is A Debt Management Program Right For My Business?

While debt programs provide an option for businesses to repay debts over time, they aren’t necessarily the best choice in every situation. Here are a few key questions to consider:

  • What is your current and projected cash flow? – If making even reduced DMP payments seems unrealistic based on your typical business income, it may not be viable. You’ll need some available operating capital to start rebuilding financial stability.
  • How much do you currently owe across all debts? – DMPs work best for managing multiple debts under $20,000-$30,000. If debts exceed that by a large margin, bankruptcy or other options may need to be on the table.
  • How long have you been in business? – An established small business with steady operations has a better shot at long-term success with a DMP than a struggling startup still finding its legs.
  • How is your business credit score? – Programs can still help if your score is poor, but a higher rating gives you leverage when negotiating reduced interest rates with creditors.
  • Are you behind on payments or facing collections? – Falling significantly delinquent on debts limits the negotiating power of debt management agencies to craft a feasible repayment plan.

While not a magic bullet, debt management can offer businesses struggling with debt a structured approach to regaining sound financial footing. Taking the time to thoroughly understand these programs allows for making an informed decision on whether it’s a wise path forward for your small business situation.


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