How to: Options for managing your debt

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Options for managing your debt


When small businesses face cash flow problems that affect their ability to repay their debts, they have several options to manage this. Whether it’s applying for a small business administration loan or an alternate terms loan, or diving into their processes to optimize their budget and cut costs, or negotiating with their creditors,  small business owners have several avenues to take control of their business finances.


Yet it’s still worth taking into account that these options don’t work for all small businesses. Sometimes, despite all the operational and financial juggling, a business owner has no other choice but to decide to manage their debt directly. The good news is that here, too, there are several options at their disposal.


Business owners can create a debt management plan

There are nonprofit credit counseling agencies that can help business owners create a debt management plan. The purpose of these is to consolidate all of the business’s unsecured debt into a single monthly payment. To get here, the credit counseling agency will negotiate with all of your creditors for concessions on the interest rates the business is charged. Once the agreements are closed, the business will pay the agency directly and they will continue managing and paying the creditors.


While this can ease the burden of the debts a business has to manage, there are drawbacks every small business owner should know:

  • It can take up to 5 years to repay the debts

  • The credit accounts included in the agreement are usually closed

  • The enrollment into a debt management plan will be included in the business’ credit report and it may decrease the score

  • It may affect the chances of the business to get additional borrowing in the future


Business owners can hire a third party to settle the debts

Small businesses struggling with their debts can reach out to a debt relief company like ours to settle their debts. This is a reduction in the principal the business owes its lenders, but it will have a negative impact on the business’ credit score, as the settlement will show up as a default. It’s also important to choose a third party company that has the legal expertise and capacity to negotiate with all the creditors and fully settle them without any future obligations.


One of the benefits of this option is that the business owner won’t lose assets beyond those pledged as collateral. More so, it’s a more preferable option than choosing to close down the business and file for bankruptcy.


As a last resort, business owners may seek bankruptcy protection

If the business has no capacity to make payments, either through a debt management program or a debt settlement agreement, filing for bankruptcy may provide additional legal protection. This option may seriously affect both the business and the business owner, and should only be pursued with an attorney who is experienced in bankruptcies for similar businesses.


Debt management can be difficult, but less so with the right partners

If your business is looking into options to manage their debt, after going through the steps of optimizing processes and finances, it’s always worth getting an outside opinion. Entering a debt management plan or seeking a debt settlement is easier to navigate if you have the right partner by your side.  


If you’re looking to consolidate your debt or restructure your loans, get help from a business debt expert like Creditors Relief. We’re willing to advise you with your debt relief options and our review process is free. Sign up here.

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