A Simple Guide to Reducing Business Debt with Debt Settlement

Every business uses debt to leverage its operations and the availability of debt is one of the principal factors behind business success. However, if not managed properly debt can zoom out of control, and it can indeed be very difficult to retrieve the situation even after a very challenging and long process. Debt settlement has emerged as a viable option for businesses that have not managed to keep their heads above the water due to a high level of accumulated debt. Some essential steps explained:

Scrutinize Your Finances

Perhaps the most important step in undertaking a process of debt settlement is getting a fix on the extent of debt since it is not a practical proposition to even try to resolve something, the extent of which is unknown to you. Bring out all your records and make a list of all the debts that you have taken, including the name of the lender, the amount, the due amount, any amount to be paid but not yet due, the rate of interest applicable, etc. You should be careful in separating your personal debt from that of the business, but if you have taken personal debt to run your business, consult your financial advisor. Make sure everything is included because sweeping things under the carpet will not make them disappear.

Prepare a Financial Statement of Your Business

Arrange to prepare a detailed financial balance sheet listing all the assets and liabilities of the company so that you know the extent of cash and other assets that can be liquidated to settle the debt. These figures will come in very handy when you are trying to negotiate a business debt settlement process with your creditors. It is quite logical that they would want to get a very clear idea of the state of your business before agreeing to settle for anything less than what they are entitled to. Preparing the cash flow statement will also give you a clear idea regarding what you can spare to write off the debt in case the creditors agree to give you more time.

Prepare to Negotiate the Debt Settlement

It is obvious that creditors will need very compelling reasons as to why they should write off a part of their debt so you will need to go to the negotiation table with an argument that is sincere, informative, and financially consistent. Be prepared to be completely truthful regarding the reasons why your business is experiencing the financial distress that is preventing you from servicing your debt on time. Make it clear to your creditors that you are being truthful, and while it is your intention to keep operating the business, you will be forced to file for bankruptcy if they do not cooperate.

Conclusion

The secret to successful debt negotiation is getting to know all the facts about your financial situation, the compulsions of your creditors, and how to walk away with a debt reduction that is meaningful for your business survival while being protected from lawsuits.