When your business takes on debt beyond a certain point, cash flow problems ensue. Depending on how serious they are, your business may be at risk of grinding to a halt. Moderate to severe business debt problems call for varying relief strategies.
However severe your business debt problem is,you need to think carefully before going for the nuclear option of declaring bankruptcy as it may ruin any chances of you ever accessing credit in the future. Creditors, employees, and customers won’t want to engage in any dealings with you, making it impossible to ever operate a business.
Furthermore, in addition to being costly and time-consuming, the process of filing for bankruptcy often spins out of control. So how do you handle huge business debt? Read on.
Formulating a Plan
Among the most important things you can do when you encounter overwhelming business debt is reflecting back on how you got your business into that situation so that you can avoid making the same unwise decisions in the future. You also need to think hard about whether you want to continue operating the business or shut it down.
Carefully assessing the data and making careful considerations might lead you to conclude that your business can succeed if only you could ease your debt burden. Lower debt payments improve your cash flow, opening up funds that can be invested into the business for the purposes of boosting profitability and enhancing your business’s ability to repay its debt.
Having a solid plan for improving your cash flow and profitability and clearly presenting that plan to your creditors can help you negotiate effective debt relief.
To come up with a good plan, you need to first understand what decisions led your business into its current situation. Thereafter, you can approach your creditors with a good debt repayment plan. Demonstrating a clear understanding of your problem will inspire confidence in creditors that you’re unlikely to make the same mistakes again.
After gaining a good understanding of the problem and taking action to ensure that it never happens again, the next step is using one or more methods of relief. There a two main approaches you can take when seeking relief from your debt.
The first approach involves directly approaching your creditors and giving a clear presentation of your debt and cash flow problems. Thereafter, you can negotiate for a reduction in interest rates and ask them to extend the term of the small business loan.
If you give a clear explanation of your financial situation and propose a debt plan that will ensure that they get their money back, reasonable creditors will be happy to work with you. If you’re not confident about your presentation skills, use the services of an experienced, trustworthy professional, such as an attorney.
Alternatively, you can obtain a debt consolidation loan from either a non-profit or private lender. This loan pays for all your unsecured loans and rolls them over into one loan with a lower APR and an extended loan term.