The Complete Guide to Business Debt Relief

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business debt relief guide

Six strategies you can use to free up cash flow and get immediate business debt relief

Business owners wear many different hats and often manage areas of their business that aren’t their core specialty. While many large organizations have dedicated departments filled with experts, most business owners don’t have the luxury of having a customer service representatives, sales and marketing managers, and finance professionals to provide the company with professional business debt management services.

Finance professionals who work with business owners understand that debt, when managed properly, does not always result in insolvency. In fact, when used properly, debt management is an effective tool that helps businesses in good – and difficult – times. Just as a personal credit card can either be beneficial or detrimental depending on how it is managed, so too can business debt have positive and negative impacts.

For example, many people are shocked when they learn that Apple has amassed close to $100 billion in debt – despite having $230.2 billion in the bank. Why would a company take on all that debt if they have ample cash reserves? For Apple, the answer is simple: taxes.

Apple’s $230.2 billion is currently in offshore accounts, and as soon as they bring it back to the United States, Uncle Sam will tax it. Wanting to avoid these taxes, Apple is using multiple types of debt (long-term bonds and short-term unsecured commercial paper) to finance its massive capital returns.

In the past, Apple has pushed for a US tax holiday – essentially a type of business debt relief program – so that it can bring some of its $230.2 billion back to the states at a more favorable tax rate. Were the tech giant to bring that $230.2 billion back to the US without a tax holiday, they would be forced to give approximately 25% of it to the IRS.  

While Apple is an extreme example, there are other (less extreme) ways to relieve financial pressures on a business by strategically managing debt. 

Seeking business debt relief does not equal failure

Almost 49 percent of small business owners have difficulty managing their debt. Unless they are part of the financial services industry, most business owners aren’t experts in this area; yet they are responsible for making major finance decisions for their businesses. If you thought the hard part of running a business was getting started, you might be surprised to discover that managing debts effectively can be even more challenging. 

In America, many of us associate debt – both business and personal – with failure. It’s not exactly a topic that we like to bring up at a party. In fact, many business owners avoid the topic completely when dealing with the day-to-day management of their business’s finances. However, by actively managing debt, business owners are better able to control the health of their businesses as well as manage the vital cash flow that keeps a business strong. 

When a business falls on tough times and struggles to pay creditors, the first solution an owner might think of is bankruptcy. However, bankruptcy is not the only option for business debt relief. In fact, it should be the LAST OPTION that you consider!  Keep reading for other strategies that you can use to manage debt and give your business its second wind.

Six strategies for business debt relief

1. Pay down some business debt – fast

While everyone has unique circumstances that lead them to seek relief from creditors, as a general rule, business debts become unmanageable for two reasons:

1. A business isn’t bringing in enough revenue to pay creditors

2. There are too many creditors that are difficult to manage 

Before turning to outside resources to get business debt relief, you should closely evaluate your business practices and see if you can make changes that would help you increase payments to your creditors so you can pay down some of your business debt right away. There’s a good chance that you’ll discover a place to cut costs or a way to reorganize resources so that your cash flow is freed up, and you can use some of that money to pay off some of your most pressing debt. 

When you are thinking about ways to cut costs, however, it is important that you don’t eliminate a part of your business that will handicap you in the long run. For example, if you temporarily eliminate marketing, you’ll need to think about the long-term repercussions. You may decide to keep your email marketing (because you have built up a large database that would be lost if you canceled), but temporarily pause social media ads until you get some relief from your business debt. Think strategically about what and where you cut!

2. Take steps to increase productivity

Once you take a look at your business’s operations for any available quick fixes to cut costs and free up cash flow, you should focus next on EFFICIENCY. Spend some time and figure out how you can streamline your business by making your processes more efficient. Improved efficiency leads to increased productivity, which will help you bring in more revenue and ease cash flow issues. 

Depending on your business’s situation, you may want to consider investing in technology that will find and fix breakdowns in your processes. Do an internet search on “business process improvement” and you will be surprised at how much you can learn! Smoother processes translate into a higher output, which leads to more sales, which leads to more cash flow to pay down debt. 

If you don’t want to invest in a technology, you may want to think about a skill development training session for you and your employees to help boost productivity.

3. Analyze your inventory

If you are an inventory-based business, cash reserves can dry up when you don’t manage your inventory properly. When doing an inventory analysis, your goal is to remain liquid – you should be able to turn your inventory into cash, so you always have enough cash on hand to pay your bills, employees, and creditors. 

As a general rule, the faster you can turn over your inventory, the higher your gross profits. It’s no surprise that stock outs or back orders are a problem, but overstocked items are also a problem. Overstocked items take up valuable space and require extra operations, which is a cash drain on your business.  

If you don’t track your inventory, you’ll likely find during your inventory analysis that there are many different areas you can optimize. For example, if you purchase a large amount of a particular item because you get a lower price per piece, you need to understand how much it costs you to store the item until you sell it all. When you add in storage cost over time, it might actually be more cost-effective for you to purchase less of the item at a higher price.  

If you have excess inventory that is draining your business, have a conversation with your suppliers about taking back the unused items. If they offer you a lower price than you paid, consider the cost you will incur by maintaining the excess inventory when making your decision. 

4. Renegotiate credit terms with vendors

Another strategy you can use to get some business debt relief is to talk to your vendors about better credit terms. If you are able to renegotiate credit terms with vendors to ones that are more favorable, you can quickly increase your cash flow and use the extra cash to make payments to creditors.

When negotiating with vendors, ask about the maximum credit period they can offer your business. If they can’t increase your credit period, they may offer early payment discounts (which often range between 2 to 10 percent, depending on the bill value).

Most vendors are open to negotiation when it comes to a business’s credit terms. However, if yours are unwilling to have the discussion, this might be a good time to broaden you vendor base. More suppliers equal more competition, so you can be sure your business is getting the best deal possible. 

5. Business debt consolidation and/or loan refinancing

Many businesses find themselves in this scenario: they have the money to pay back creditors but struggle with managing all the different accounts. Even if you have a good cash flow, you may still have trouble managing business debts due to a large number of creditors. 

Nearly a quarter of businesses that applied for funding during the second half of 2016 sought to refinance existing debt, according to the Federal Reserve’s Small Business Credit Survey released in 2017.1

Business debt consolidation and loan refinancing both free up cash that you can use to pay creditors. When consolidating business debt, you combine several loans or merchant cash advances into one loan or cash advance at a better interest rate or with better payment terms, resulting in lower payments and/or a longer term. Refinancing business debt with a lower-interest loan allows you to save money by paying off a loan that carries a high-interest rate.

6. Business debt settlement and restructuring

If the word “bankruptcy” has crossed your mind, it’s important to explore all options before you take that step. Business debt settlement and restructuring are viable alternatives to bankruptcy.

The primary reason that businesses choose to settle and restructure debt is to significantly reduce the amount owed. 

In addition to the main goal of significantly reducing the amount owed, business debt settlement and restructuring provide these additional important benefits: 

1. Reorganizes your business and your business debt, giving your business a second wind; 

2. Protects your personal assets by making sure the business handles its own debt; and 

3. Engages your creditors in a discussion to reduce your debts with the goal of maintaining a long-term, working relationship with your creditors.

When exploring the option of business debt settlement and restructuring, it’s crucial that are guided by business debt professionals, like Creditors Relief. Our primary objective at Creditors Relief is to find the best solution for your business, whether that solution is to reduce your business debt payments, quickly improve your cash flow, or save your business from closing.

If you are receiving daily collection calls, falling behind on payments, or even using personal assets to secure an advance for your business, you are putting your business – and your future – at risk.

Contact us for a free phone consultation at 877-312-6478 and we will formulate a budget that you can follow. We’ll then figure out which debts we can help you settle and restructure.

When it comes to business debt settlement, companies of all sizes and types have gotten immediate relief from our expert advice. Whether you are concerned about an unsecured loan or a merchant cash advance, Creditors Relief can help. Creditors Relief has settled millions of dollars in debt for businesses all across the country.

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All our work is 100% confidential. We don’t share your information with 3rd parties that aren’t involved in the collections process, and we definitely will not make it public that your company applied for debt relief.

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