Thank you for visiting Delancey Street. This article is about business debt settlement in the city of Nashville. At Delancey Street, we’re a business debt relief company based in New York that works with owners nationwide, including Tennessee and the city of Nashville. We’re not going to tell you that settlement is always the answer, because often it’s not. By reading this article, what you’ll learn about is how the mechanism actually works, what Tennessee law means, and what facts change the outcome if you’re contemplating business debt settlement.
There’s no official list of the best business debt settlement firms in Nashville
There’s no official list of the best business debt settlement firms in Nashville. Nobody’s actually scoring them. Anyone who shows you a ranking either made it up or bought it.
What actually matters when you’re contemplating who is the best business debt settlement company in Nashville is whether the firm handles your specific type of debt and whether it can actually litigate if litigation starts. An MCA is different than an SBA loan. A revolving business credit line is different from both. A firm that is good at one does not mean that it’s automatically good at the others.
Whether location actually matters
The second thing to contemplate is whether location actually matters. Debt settlement is done by the phone, email, and court filings. Simply hiring a Nashville business to handle your debt does not mean they understand how to negotiate with funders in Brooklyn. What helps is someone who can appear in or work with local counsel and, more importantly, has relationships with the different funders in Brooklyn or New York City or wherever they are.
Why the lender actually takes less via business debt settlement
Now let’s talk about why the lender actually takes less via business debt settlement. Settlement works for one specific reason. A creditor who has a claim against you is comparing what you offer today to what they can actually get later through a judgment.
Now, a judgment is a piece of paper, but collecting it is the main issue. Collecting it means finding assets that your business has and being able to seize or levy them. If your business is a service company with receivables, no real assets, no real estate, then the creditor is looking at a garnishment and a potential long wait. If you’re genuinely about to shut down, then the creditor’s realistic recovery drops towards zero.
That’s the real leverage you have when contemplating business debt settlement. It’s not persuasion; it’s simply showing them the math equation.
And that’s why settlement percentages aren’t a fixed menu. They move based on:
- how much collateral you have
- your cash flow
- whether you signed a personal guarantee
- how many other creditors are in line ahead of the one you’re actually dealing with right now
Most business debt follows a pattern
Here’s the game plan. Most business debt follows a pattern. Typically, it begins when payments stop or get reduced to the creditor. Their internal collection team will start calling within a few days, and within a few weeks, follow with a lawsuit. Typically, default interest and fees get added onto the contract, and this can represent an additional 20 to 40 percent of your remaining balance. At this point, usually the file is moving to an outside collector or law firm.
Typically, at this point, somewhere in there, the creditor is going to decide whether to sue. Suing obviously costs money and reduces the chance of recovery. So smaller balances often sit in collections for a longer time. Larger balances, and specifically balances with a personal guarantee behind them, get filed faster.
What a UCC-1 means for your vendors
If the lender secured and filed a UCC-1, it typically doesn’t have to wait for a lawsuit at all. They can take other steps ahead of that. For example, with a UCC-1, the lender can take possession of collateral after you’ve defaulted or go into court. So what that really means is they’re going to reach out to your vendors, to anyone who pays you money, and tell them that they have to now divert those funds to the lender instead. And this is a real and frequently underestimated risk for business owners.
Tennessee state rules that matter more than people expect
Now, here are some things that could change the math in your favor or against you. There are a few state rules that matter more than people expect.
Confession of judgment in Tennessee
Confession of judgment signed are typically not enforceable in Tennessee. That’s a big difference from New York, where funders have historically used them in order to get around filing lawsuits and waiting for them to resolve. Tennessee courts have enforced foreign judgments that were entered elsewhere on a confession of judgment, and typically a confession given after a lawsuit is filed is a different thing. So the protection is real but very narrow, and the venue clause in your contract may matter more than the state you operate in when dealing with MCA lenders.
Execution and garnishment after the judgment is entered
After the judgment is entered, there are Tennessee rules of civil procedure that block execution for 30 days, with narrow exceptions where you, the borrower, is about to hide or dispose of property or assets. Once a garnishment is served, a garnishee that does not respond within 10 days can typically face a conditional judgment being made final against it. At this point your bank and your customers get pulled in fast and are told to route payments to the lender.
Reasonable notice before disposing of collateral
If collateral is repossessed, the secured party generally has to send reasonable notice before disposing of it. And that notice goes to the guarantors too. Failure to do it properly can cost the creditor its deficiency claim. Typically, that’s a defense worth checking before you agree to pay a deficiency number.
SBA loans are typically a separate track
Now let’s talk about SBA loans. They are typically a separate track. Do not let the company you’re speaking to treat an SBA loan like a cash advance. Typically speaking, we see compromise on an SBA 7(a) loan run through the SBA’s servicing and liquidation procedures.
Offers to settle for less typically require an SBA Form 1150, offer in compromise, and you need to provide supporting financial statements from each person or entity seeking the compromise. And typically, principal reductions require the SBA’s approval rather than the lender’s discretion who you got the SBA from. In addition, lenders also operate under their own timelines for resolving these types of loans.
SBA settlements are a documentation exercise, not a negotiation contest, and your leverage is going to come from having financial conditions that can be documented.
MCA regulation is thinner than most people think
Now, when we talk about MCAs, the regulation is definitely thinner than most people think. There is obviously the FTC’s advance fee ban for debt relief, which sits in the Telemarketing Sales Rule and is aimed at consumers. There are some overlap with business-to-business debt relief, but for the most part, MCAs are a separate category.
The best choice, typically, for Nashville business owners is the firm whose theory matches your facts. If you have MCA debt, then at this point it is advisable that you speak to a company like Delancey Street who can help you out and explain exactly what your strategy should be.
Invoking the reconciliation clause and other defenses
In the past, we’ve taken a multi-pronged approach to helping business owners resolve MCA debt and business debt. For example, invoking the reconciliation clause is one initial step that business owners can take among for themselves, but also something Delancey Street can help you with.
Most lenders don’t want to honor the reconciliation clause because what that means is it lowers the amount of money they can collect from you. But by contract, if your revenue goes down 20%, then they have to honor the reconciliation clause by reducing the amount they’re taking by 20%. This and other defenses are available to you, but only after you speak to a company like Delancey Street who understands which strategy to employ on your behalf.
