If you’re business is going under in finances, look no further! Here are 6 debt relief options that are perfect options for small businesses everywhere!
If you own a small business, you’re aware of how important keeping on top of your finances is. Unfortunately, fierce competition from larger corporations can drastically hurt your revenue.
When this happens, it’s easy to run into serious financial trouble. This is a common situation for smaller entrepreneurs. In fact, 82% of small businesses that fail do so as a result of cash flow issues.
Another common situation is getting buried under too much debt. This can mean the end for many small businesses, but it doesn’t have to be. There are a number of debt relief options available.
If you’re wondering how to get out of business debt, keep reading. We’re going over six possibilities.
Before you start considering more intensive approaches to your debt issue, it can’t hurt to negotiate with the organizations you have debts with. There’s a good chance they’ll work with you.
When negotiating, it helps to be upfront about your situation. If your lender is sympathetic to the situation you’re in, they may restructure your debt to relieve some of the stress.
This could mean changing the due dates of your payments. Doing so could allow you to make smaller payments throughout the month instead of having to make a huge payment all at once.
You may also be able to negotiate the terms attached to your loan. There’s a possibility they can increase your repayment time.
This would bring down your monthly payments and make paying back the loan more manageable. Just watch out for a hike in interest rates.
One of the more common debt relief strategies is to consolidate all unsecured debts into one loan. These loans are great for businesses that are getting eaten alive by multiple payments each month.
This is typically done with debts that have high interest rates. You’ll then only have a single loan payment to make each month.
These debt consolidation loans usually have lower interest rates, which makes them easier to pay back. Try to obtain a consolidated loan from a nonprofit lender, as they typically have the best interest rates.
If you don’t qualify for a loan from a nonprofit lender, you can still get one from a private lender. However, you may need to put up assets in order to get lower interest rates. Keep in mind that if you become delinquent on your loan, there’s a good chance you’ll lose the assets.
If you’re unable to obtain a debt consolidation loan, you may want to consider seeking help from a credit counseling agency. These nonprofit entities will assist you in forming a plan to manage your debt.
Like a debt consolidation loan, the result of this plan is that you only make a single payment each month. However, you make it to the credit counseling agency.
Their job is to contact all your creditors and negotiate for lower interest rates. Once they’ve come to agreements with your creditors, you start paying the agency and they will distribute the monthly payments to your creditors.
The downside to this approach is that it may take years to pay off your debts. A debt management plan can also hurt your credit score. However, you’ll no longer have to deal with creditors, which means you can focus on your business.
Again, only choose this option if you can’t obtain a debt consolidation loan.
A great way to alleviate business debt on your own is by taking a close look at your budget. There may be areas where you can free up money to put towards your debt.
You should start by cutting out all unnecessary expenses. If something’s not absolutely necessary for day-to-day operations, eliminate it.
Another tactic is to start promoting products or services that have higher profit margins. This will help boost your bottom line and also bring in cash to throw at your debt.
Finally, you may even consider increasing some of your prices. However, do a little market research first to ensure you won’t lose clients.
Not only is streamlining your budget a great way to free up cash, but it also helps your chances of getting a debt consolidation loan if you need one down the road.
Debt settlement works by reducing the amount owed to your lenders. Before deciding on this approach, make sure you’ve exhausted all other options.
A debt settlement entity will help you reduce your debt. In exchange, they’ll earn a percentage of the total amount they end up saving you.
The biggest problem with this approach is that it negatively affects your credit. In fact, it shows up as a default on your credit report. This is why you should consider this only as a last-ditch effort before bankruptcy.
To be sure you’ve exhausted every possible option, check out Ask National Debt Relief for more information.
If you decide to go this route, you could also work with an attorney instead of a debt settlement agency. They can negotiate for a reduction and also handle all the necessary paperwork.
For business owners, bankruptcy is a painful word. However, this may be the only way to save your organization if no other debt relief options are possible.
Small businesses usually file Chapter 11. This form of bankruptcy helps you negotiate new terms on your loans and credit card debt.
You’ll need to work with an attorney when filing a bankruptcy petition. The paperwork associated with this is overwhelming, so avoid the temptation to do it yourself.
After filing bankruptcy, you’ll enjoy lower monthly payments and can change the conditions of your debt. However, this will negatively impact your credit and make it impossible to get future loans. Bankruptcy is also a stain on your business reputation.
Before you move forward with any of these debt relief options, make sure you evaluate your current financial situation from every angle. It may help to work with a business attorney to determine the right move for you.
Remember, debt relief is meant to provide a new beginning. If done correctly, your business can reclaim its financial freedom.
Check out more articles on managing finances for your business.