Business debt occurs when businesses struggle to fulfill financial obligations. To protect against financial loss and protect creditworthiness, many companies file for personal bankruptcy. However, business debt often hurts creditworthiness. Bankruptcy should only be used as a last resort for serious financial hardship. It’s crucial to determine if you can reduce any expenses immediately before exploring bankruptcy. You should also seek professional help with debt consolidation or debt settlement.
Debt relief for businesses is a possible solution if your company is struggling to meet financial obligations like credit card payments, overdrafts, and small loans. Plenty of businesses were affected by the COVID-19 pandemic. If you can eliminate at least 50% of your total debt then it will be easier for you to manage your company’s finances.
There are several ways for businesses to get debt relief. Some of these methods will require obtaining a loan from either a financial institution or a private investor. The loan that they provide is used to pay off the debt. However, in some cases, the creditors may provide a secondary loan to pay down the business’s obligations even faster.
Here are the things you need to know and where to start with debt relief for your business.
1. Take A Look At Your Finances
There are several debt solutions available for businesses but it’s crucial for business owners to assess their financial situation. They need to look at the debt that they’ve incurred and determine whether or not it will negatively impact their ability to operate their businesses. Once they know what their obligations are, they can begin to look at the options that they have for business debt relief. For example, businesses may need to obtain a loan to pay off their obligations, or they may need to sell their assets.
If your company has unmanageable debt, you can also benefit from consulting with a professional that can help you create a cash flow plan. By following a plan like this, you may be able to reduce your financial liability in the next six months. In addition to that, by reducing the amount of money that you’re spending each month on costs, you’re also better able to increase the amount of money that you’re bringing in each month.
2. Choose A Suitable Debt Relief Program
Business debt relief lowers expenses and enables businesses to survive. Before opting for bankruptcy, see if you could cut any expenses instantly by implementing some debt relief methods:
- Tax Debt Relief
Tax debt relief is another popular solution for businesses with unmanageable debt on the table. Many businesses can save money on taxes by structuring their payables. They can also structure their payables to reflect expenses. Tax debt relief can be achieved by negotiating with the Internal Revenue Service. You can also try working with an accountant, a tax attorney, or a tax expert—you can click here for more information.
Business payroll taxes are another way that businesses can reduce their financial liability. The method of reducing the liability involves reducing the amount of payroll taxes that businesses owe to the government. Some businesses can achieve payroll tax forgiveness through tax planning and others can achieve this through having an effective payroll taxes attorney provide them with an effective strategy for reducing their tax liability. Many entrepreneurs who are looking to reduce their taxes also want to ensure that they’re meeting all of their other obligations as well.
- Deferment
Debt management through deferment is another option that can be used to reduce financial obligations for businesses. With this method, businesses have the choice to pay their loan regularly or in intervals. Deferment refers to delaying payment until you receive a collection. When a business owner delays payment, however, he faces penalties like late fees and penalties. Small businesses with limited sources of funding may need to look at other debt-relief options as deferment may be more suitable for bigger companies.
Another option for business debt relief options is an installment plan. Under this arrangement, the debtor pays monthly payments into a trust account. When the required amount has been accumulated, the money is transferred to creditors and the creditors, in turn, pay the funds to the debtor. This method has been very helpful for many businesses as it has helped them get rid of a large chunk of their debts.
- Debt Consolidation
A viable solution for business debt relief is debt consolidation. Debt consolidation is one of the best methods that can be applied to manage debts for small businesses. Debt consolidation can be achieved by negotiating with different creditors to obtain a refinanced or new loan.
When you consolidate debts, you’re merging multiple loans into a single monthly payment. The payment amount may vary, but the total settlement is usually lower than individual payments combined. However, it’s still important for business owners to have a written financial plan with a debt consolidation specialist will tell you.
There are two options available when merging multiple loans. The first option is by taking out a new loan, the second option is to use debt consolidation to refinance an existing loan. Most businesses that participate in this program enjoy saving money from multiple debt payments.
3. Go For Settlement
If the abovementioned debt relief programs are not suitable to restructure your business debt, your company may want to consider settlement. Debt settlement enables the business owner to eliminate a portion of the total amount of the debt. As the term suggests, this method involves negotiating with the lenders for a waiver of dues.
Most of the financial relief firms provide their services free of cost, though some firms charge an additional fee. When negotiating with the lenders, a professional firm may use debt relief tactics such as hiring experts to counter the points of the lenders. Some of these lenders may agree on reducing the total debt by a certain percentage, thereby, helping the borrower or the business owner to pay less.
Takeaway
When applying for a business debt relief program, you should first seek advice from professionals. These debt relief professionals are experts in the field of finance and they can provide valuable input and advice. Once you hire a debt relief consultant, you can proceed with the application process on the program best suited for your circumstances. For businesses that have suffered from recent losses, it’ll be beneficial to make use of a reliable debt relief firm instead of directly approaching creditors.
