Three Ways to Resolve Your Business Debt
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Small business entrepreneurs whose companies are mired in debt can find a way out again, if they are willing to work with debt relief providers. These are organizations that provide complementary counseling sessions and give insight into what the business owner can do in order to lessen their debt burden and save their business from bankruptcy. There are many debt management options available, and you can choose the one that's best for your business based on extensive discussions with the debt experts.
How to Regain Your Financial Stability Through Business Debt Management
1. Debt settlement. There are debt relief organizations who offer debt settlement services. The debt negotiators working in these organizations act as the bridge between the debtor and the creditors. Through a debt settlement program, a debtor can repay less than what they actually owe. Debt negotiators ask creditors to liberalize their terms, give up their demand for interest, penalty charges and fees, and accept only the reduced principal amount. If the creditors agree to the offer, the debtor can become debt free by paying off this reduced amount on the terms agreed to. But there is a downside to this approach. Debt settlement could impact your credit score and will certainly affect your ability to obtain new credit.
2. Debt consolidation. Businesses opting for this strategy work with a debt consultant who prepares a budget based on the company's financial outlook and income projections. The consultant contacts the creditors in order to get the repayment plan approved by them. Under this program, multiple payments are reduced and combined into one easier-to-manage payment, interest rates are lowered and additional charges removed, and repayment timetables are extended – all of which makes it much easier for the debtor to follow the payment schedule.
3. Bankruptcy. Bankruptcy is usually considered a "last resort" since it still carries a social stigma in North America. If a company is insolvent (i.e. unable to pay its debts), it can file for bankruptcy protection. In the United States, businesses can opt for either Chapter 7 (the simplest route) or Chapter 11 (reorganization) bankruptcy. Chapter 11 is often referred to as "corporate bankruptcy" - it is a method of financial reorganization which allows a company to continue to do business while following an agreed debt repayment plan.
In Canada, a bankruptcy must be filed through a Trustee in Bankruptcy. The first step is to meet with the Trustee and discuss your situation. He/She may find alternatives that you haven't considered. Finally, small business owners should review their company’s annual budget and employ every available cost reduction measure. This will free up extra cash to help pay down the debt. Meet with your creditors, discuss your situation, and try to find a compromise that will work for both sides.
For more details on debt management, visit http://www.debtconsolidationcare.com/de … ement.html.