Time can be a business’ enemy or friend, depending on how soon the debt is acted upon. Immediately contact creditors and explain the current debt situation. Ignoring lenders will make the situation worse. Tackling a debt problem in the early stages will make the process easier to resolve.
It is in everyone’s best interest to find a solution, so lenders should work with businesses to lower interest rates, increase the credit line, and restructure repayment options. Dealing with multiple creditors or collection agencies can take away from running the business. Reputable debt consultants can negotiate with creditors to settle debts for less than what is owed.
Creditors are terrified of losing the money they loaned out and need to remove the debt from their books. They will respond positively to efforts in starting the negotiation process of debt collection. Debt negotiation means creditors have the chance to recover some or all of its loaned assets.
Be prepared to put down some money. Lenders may want at least half of the loan up front. Creditors may not even negotiate until some money is given over. This is where a consulting company is useful – they could get businesses a lower upfront fee to begin negotiation.
When a payment is made to the creditors with a credit card or bank account, the creditor then has all of the owner’s banking information. If an owner gets sued during the process, the creditor has this information and can get at an owner’s funds easily. Instead of these payment methods, pay debt with a money order so information is secure.
Creditors are willing to settle for less in order to guarantee they get something back. Many business owners should expect to pay less for a lump-sum payment. Owners need to demand the debt be shown as paid in full on the credit report. Fully paid or debt satisfied is the kind of language owners want to see on a report. Debt still active is not want owners want.
Do not back down and accept a repayment deal that is too much for an owner to pay. Do not agree to any debt payment plan that cannot be afforded. Owners need to tell creditors what they are willing to pay. Let them know if they demand more, the owner will be forced into bankruptcy where creditors receive no payment whatsoever.
Find out how far a creditor is willing to go. If they offer three months at no interest, try to get six months. Always aim for a higher deal and understand how much negotiating room there is to work with a personal budget.
A lawyer may have to get involved if there is a substantial amount of debt. Most creditors have agents or customer service reps to handle debt negotiations. A lawyer can also be helpful if negotiations are going nowhere, or if a creditor does not fulfill their end of a settlement. Having a lawyer early on means a written settlement contract and smooth negotiations.