Statistics from a recent Federal Reserve survey state that 43% of small businesses applied for loans in 2019 alone.
It is often said that you have got to have money to make money. Taking out a business loan can provide you with the cash injection you need to boost your business to new heights.
However, if business credit starts to take on a life of its own, and you find yourself swamped with escalating debt that you can’t keep track of—it’s time to take action.
Enter business debt consolidation.
There are a few ways you can go about settling your business’s debt. However, to successfully and safely consolidation, you need to know what methods there are and how they work. You also need to know what strategies to follow to ensure a smooth process. Keep reading to find this out and get your business debt back under control.
1. Decide How You Want to Payoff Your Debts
The first step in eradicating your debts is to decide how you want to pay them off. If you wish to do this over an extended period of time, you could consider debt consolidation.
On the other hand, if you instead want to consolidation your current debts in one go, or get them reduced, you have a couple of options. The first is to liquidate funds to cover the debt outright. This can be done by selling assets such as equipment or property.
However, most business owners don’t wish to do this or can’t. Simply throwing cash at your debts without proper planning can also lead to cash flow problems.
If you wish to manage your current debt, and possible get it reduced in the process, then you should consider debt consolidation solutions.
Debt consolidation is a term that describes the process whereby either you or a third party works with your creditors.
If you take the DIY route to debt consolidation, it is unlikely that you will be able to resolve the debt in one go. Instead, you may be able to agree to more manageable terms with your lender, or in some cases secure a portion of the debt to be forgiven.
On the other hand, if you bring on a debt resolution company to work for you, they might be able to resolve in one go with your creditor. The remaining debt is then effectively transferred to the debt resolution company.
After this point, you then make monthly payments to the debt resolution company at terms that are manageable for you.
2. Don’t DIY Resolve Your Debt
Although you can choose to enter into discussions with creditors yourself, this is not always the best route.
Debt resolution companies are highly experienced at handling these talks and have industry knowledge that you don’t. Because of this, they are often more likely to secure better terms and even be able to wipe away a portion of the debt.
They also have more leverage, as they are able to work with creditors once-off. For you, this has the advantage of an increased willingness from creditors to work with you. If you have been laboring under regular collection attempts, and the prospect of litigation should you not pay.
Therefore, even though you will still have the rest of the debt to pay off, it will be under new terms that you can meet and without collection attempts (providing that you adhere to the terms).
3. Do Your Research On Debt Resolution Companies
When looking for debt resolution companies, it is important that you do thorough research. The finance industry as a whole is fraught with unsavory offerings, and debt consolidation is no exception.
Because most people who are looking for debt resolution need urgent assistance, less than ethical companies may take advantage of this by not being 100% transparent in their offering.
Fortunately, there are also good debt consolidation companies out there that you can trust. The key to finding these is to do thorough research into any likely prospects, and dig deep into their reputation.
Online reviews are a great place to start. You can take a look at platforms like Google Reviews and Trust Pilot to gauge whether or not a debt resolution company has a good track record.
You should also check to see whether or not any promising candidates are registered with the Better Business Burea (BBB), and if so what rating they have. A debt consolidation solution with an A+ rating is a highly promising sign, as the BBB imposes strict requirements on businesses to achieve these ratings. Companies can only possess an A+ rating if they are fully transparent in their business dealings, fully licensed, and have a spotless dispute resolution track record.
To find out more on discovering reliable solutions via the BBB, read this post.
While researching potential debt consolidation solutions, also take note of how long each company has been in business. Companies that are experienced in debt consolidation will likely be able to secure you a more successful deal than one just starting out.
4. Aim for Quick Resolution
Once you enter the debt resolution process, try to ensure that it is as swift as possible. A company will request that you cease payments to your creditor. This money then accrues in a special account as conversations take place.
The longer this goes on, the more insistent demands you will receive from your creditor,(s) and the higher the chance that you will receive a summons for the outstanding debt.
What’s more, the general rule of thumb is that the longer discussions take, the less likely you are to get a deal.
5. Ensure That You Can Keep up With Your New Payment Structure
Once you have a new set of terms with your debt resolution company, it is essential that you stick to them. The process of debt consolidation will impact your credit score negatively. If you stick to the new payments, you will quickly be able to build it back up.
However, if you don’t, not only will your credit score keep sinking, but you also will be back where you started.
6. Plan for Tax Time
Any portion of your debt that is forgiven during restructuring is considered taxable income by the IRS. Therefore, if you enjoy a restructuring where some of your debt is forgiven—you will need to set some extra money aside for tax time or increase your provisional tax payments.
Do You Need Help Finding a Business Debt Consolidation Solution?
Are you looking for a reputable business debt consolidation offering?
If so, Debthunch is the perfect solution for you. Our personalized finance platform analyses your information and instantly matches you with up to three personalized offers from our network of approved providers.