Friday, December 8, 2017

Business Debt Settlement - The Nitty-Gritty You Cannot Afford To Miss

Business Debt
If you are facing difficulties repaying individuals and organizations whom you owe money as an entrepreneur of a small business establishment, then debt settlement can turn out to be a viable solution for you. 

It refers to a process where you sit across the table with your lenders to negotiate reconsidering the existing terms of your outstanding contractual liabilities with them. 

During the discussions, you ask them whether they can accept the lump-sum repayment of a certain percentage of your debts that they consider as severely delinquent and write off the rest. 

This can go a long way in maintaining your creditworthiness in the marketplace as a reliable businessperson.

When you consistently fail to make timely repayments on your contractual obligations, your creditors may be willing to be lenient on you. 

Being businesspeople themselves, they are usually ready to accept an agreement that allows you to make a one-time lump-sum payment for the entire amount of money you owe them. 

This is because they are aware that in the worst-case scenario, they may not receive any form of payment at all if you can apply for bankruptcy. You should note such negotiations usually are never easy for any entrepreneur in your situation. 

However, such lenders hold the view that receiving a payment of 80% of the total amount of money you owe them and writing off the remainder is a viable option. 

Unfortunately, such creditors will not negotiate such terms if you make timely payments on the amounts you owe them.

What happens when you hire a debt settlement company?

You can opt to hire the services of a company that specializes in debt settlement to carry out the discussions with your creditors on your behalf. 

 You need to pay a reasonable sum of money to them to arrive at an agreement, which is acceptable to you and your lenders. The officials of such a corporate enterprise tell you to stop making repayments to your creditors and start depositing this money into an escrow account they set up for this purpose. 

They use the sum of money that accumulates in this account to make the one-time payment to your lenders for the outstanding debts you owe them.

In the initial stages, which may spread over a period of several months, you may notice that most of the money you pay to this organization is towards fees. This amount could exceed a total of a thousand dollars before money starts to accumulate in the separate account to repay your creditors. 

You need to remember that the outstanding amount you owe your lenders also grows as they begin to charge interest and penalties for late payments. If the situation further deteriorates, your lenders may even consider taking you to court for failing to repay your contractual obligations to them on time. 

This can also hurt your creditworthiness and reputation in the marketplace. Even if you do reach a settlement with your creditor, you have to pay taxes to the internal revenue service(IRS) on the amount of your debt they write-off.

When you opt to go down this road, you need to provide the business debt settlement company with the name of all creditors and the outstanding sums of money you owe them. 

The officials of this corporate enterprise then give an approximate estimate of the monthly installments you have to make to them at a lower rate of interest. As soon as the amount accumulates to a reasonable sum, which usually after paying the fifth installment, they contact your creditors to begin negotiations.

This is for reaching an agreement on the lump sum payment you have to make towards your outstanding debts to such lenders and the percentage they are willing to write-off.

Debt consolidation loans

Most companies specializing in this field of business usually advise you to opt for a debt consolidation loan. Under this scheme, you may combine all your many contractual obligations of creditors that are outstanding till date into one single loan. 

This debt allows you to make a single monthly installment payment rather than many. In addition to this, it carries a lower rate of interest than the previous ones. Banks, various credit unions, and similar financial organizations offer their customers this mode of debt settlement. Its advantages of this form of debt settlement are as follows:

1. Single payment

Under a debt consolidation loan, you convert all your many outstanding contractual obligations into one. You also make a single monthly installment payment for such a debt. This relieves you of the tension of having to remember of deadlines for making loan payments.

2. Lower rates of interest

Such loans carry a lower rate of interest than other forms of debt settlement options. This implies that you can save a considerable amount of money on interest payments. This is beneficial for entrepreneurs who have trouble repaying their business credit card dues and other contractual obligations on time.

3. Put an end to collection calls

When you have some outstanding dues that you owe to your suppliers, you usually fall behind in making timely repayments. If this trend continues over an extended period, your creditors have no option but to hire the services of a reliable collection agency. 

Once this happens, you start receiving phones from the officials of such organization asking you to make your payments on time. However, you can put an end to such harassment by opting to combine all your minor contractual obligations into a single debt consolidation loan.

4. Credit scores

If you are not repaying the monthly installments on your debts on time, it can adversely affect your creditworthiness. This can give you a bad reputation in the marketplace. However, if you decide to opt for a debt consolidation loan, you only have to make one timely monthly installment payment, which boosts your creditworthiness.

Settlement options like debt consolidation loans can go a long way in saving your business from bankruptcy as the above advantages go to show. Moreover, you will also be improving your relations with your creditors in the long-run.

Author Bio: Karen is a Business Tech Analyst. She is very responsible towards her job. She loves to share her knowledge and experience with her friends and colleagues.

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