A Quick Guide To Settlement Of Business Debts

Normally, it is a common phenomenon of any business to take loans either towards the purchase of assets for the company or operational purposes.  Not all the businesses succeed initially or rather they may not earn sufficient income to repay the loan amount within the specified time.  The loan amount taken can be referred as "Debt." In other words, debt is the amount to be repaid to the creditor some day or the other. It becomes a big headache to the debtor when he is not in a position to repay his loan.  The creditor may go to such an extent that the debtor is forced to apply for bankruptcy.

Nowadays, it is a ubiquitous statement found in social media that so and so person or company is bankrupt. Now, what exactly is bankrupt? An individual or business entity is said to be bankrupt when he/, or the business entity is not in a position to repay the debt taken from creditors. This means a total loss to the creditors or investors.

Chances of debt settlement service

However, there is another option to this problem.  The debtor can try to make the effective strategy of negotiating with the creditor for business debt settlement. In Business Debt settlement, the debtor and creditor negotiate with each other and reach a settlement regarding lump sum amount to be paid to the creditor and the same is followed by the debtor. Here we find that the creditor is not losing the entire amount due to him.  At least some part of it is being repaid. The debtor is benefited as the creditor agrees to forgive a certain percentage of the total balance.  Business debt settlement can be successful when both the parties, i.e., creditor and debtor agree to the terms. However, there is 50-50% chance of success.

How the settlement services can the settlement service?

Business debt settlement can be done either by approaching a professional firm or individual. Normally when a professional debt settlement company is approached, the debtor has to shell down some fees or rather some percentage of the debt amount. Usually, in any business debt settlement, the debt settlement companies contact the creditors on behalf of the debtor and do the negotiation. The business debt settlement companies generally can solve the problem and proceed towards a settlement agreement faster than a debtor doing it on his own. The only drawback by approaching business debt settlement companies is that their fees may sometimes become an additional burden to the debtor.

Negotiating with the creditor

Business debt settlement can be done individually also.  The debtor can contact the creditor directly and try to negotiate for debt settlement.  Initially, there may be some problems, but it depends on the debtor how he tackles the situation and puts his point of view based on which the creditor may be convinced to forgive a certain percentage of debt.  There is 50-50 % chance of regaining the confidence of creditor and make the business debt settlement negotiation successful.

By approaching the creditor directly, there is a chance of building a good relationship with the creditor.  The debtor can save many amounts which he had to pay to a debt settlement firm in case he approaches them. The main problem comes when the creditor disagrees to negotiate for debt settlement. Every creditor has his terms which are very difficult to manage.  The services of a professional business debt settlement firm play a prominent role in such situation.  A business debt settlement company normally has qualified and talented staffs who can tackle the situation as they are specialized in dealing such cases. 

 Failing the debt settlement negotiation

In case the business debt settlement negotiation does not succeed, there is no need for the debtor to panic. Any business man should be aware his firm's financial position and act accordingly.  In case, the firm is running under losses, and financial position is getting low, it is best for the businessman to work smartly before the financial position of the business gets worst. He may take the following measures to overcome the problems and plan debt repayment schedule once again.

1)   He has to cut unnecessary costs and try to avoid them till the situation is normal. At the same time, he should take care of the reputation of the company as once the goodwill of the business is lost; it is a significant loss the company and very difficult to regain the goodwill back.

2)      Wherever he had invested cash, it has to be liquidated to clear the debts. Investments are always an asset to the company.  However, when the company is under threat, these investments help to overcome the problems to some extent. If not the full amount, at least a part of the debt can be cleared to creditors.  Problems cannot be avoided but can be postponed for some time.

3)      He has to make a priority list of debt payments and consolidate the debt amount.  I suggest all small payments have to be cleared on priority.  This will help in finalizing significant debts.

4)      Whichever debt can be cleared has to be paid off. All payments to small creditors to be cleared first. Even in the case of big debts, at least a small amount of debt has to be cleared which will sometimes stop the creditor to take serious action against the firm.

5)      In case, there is a debt which cannot be cleared, then business debt settlement negotiations have to be done once again if required. Moreover, the procedure for business debt settlement starts once again and will repeat till the total debt is cleared.

By doing business debt settlement, the debtor not only gets a chance of reducing the debt amount, but he may try to make a settlement with the creditor with new terms.  This will give him additional time to act accordingly.

Settlement of Business debts is a good option than going for bankruptcy.  Whether opting to go for professional services or doing it individually, it is left to the businessman.  He has to take a necessary decision based on his firm's financial position and act accordingly. The success in debt settlement does not mean the problem has ended.  The problem will end only when the debt according to the settlement is cleared to the creditor.