Cash Advance Debt Restructuring: Options to Avoid Default
So you took out a merchant cash advance or some other kind of cash advance loan for your business, and now you’re struggling to make the payments. Don’t panic – you have options. Cash advance debt can be restructured to make it more manageable. This article will walk you through what cash advance debt restructuring is, the pros and cons, and how to go about it.
What is Cash Advance Debt Restructuring?
Cash advance debt restructuring basically means changing the terms of your loan agreement to make repayment easier on your business. Common ways lenders will restructure cash advance debts include:
- Lowering the interest rate
- Extending the repayment period
- Reducing the weekly/daily repayment amount
- Allowing interest-only payments for a period
- Settling for a reduced payoff amount
The goal is to reduce the cash drain on your business so you can avoid defaulting while continuing operations. It gives you some breathing room when cash flow is tight.
The Pros and Cons of Cash Advance Debt Restructuring
Restructuring merchant cash advances or other cash advance loans can throw a critical lifeline to struggling businesses. But it also comes with some drawbacks to weigh:
- Lowers weekly/daily payments to free up cash flow
- Avoids default and preserves credit score
- Stops collections activities against your business
- Allows you time to improve business performance
- Settling debt saves money over full repayment
- Fees involved to change loan terms
- More interest paid over longer repayment period
- Credit score still damaged if prior late payments
- Business must become profitable to repay debt
- Settling for less still dings credit reports
So in short – restructuring reduces the cash flow crunch but results in more interest paid over time. The business needs to work on boosting revenues and profits to prevent ending up back in the same situation down the road.
How Do You Restructure Cash Advance Debt?
If you realize your business is starting to struggle with cash advance payments, act quickly to restructure before you miss payments. Here is the basic process:
1. Review business finances – Get clear on exactly why existing payments are unaffordable. Look for ways to reduce expenses or boost revenues in your business. You need a plan to improve profitability.
2. Contact lenders – Let your cash advance lenders know you are having trouble making payments on schedule. Communicate openly about your financial situation.
3. Negotiate new terms – Propose specific ways to restructure the debt agreements – reduced weekly payments, longer terms, partial settlement, etc. Get any changes in writing.
4. Seek professional help – Work with a business lawyer or debt relief company if lenders won’t negotiate fair repayment terms. Legal and financial experts can often achieve better results through formal debt restructuring programs.The earlier you initiate discussions with lenders, the better position you will be in to negotiate repayment terms you can actually afford. Ignoring the problem usually just makes matters worse.Most legitimate lenders want to help preserve viable businesses able to repay debts over the long-term. So if you have a sound business model but temporary cash problems, restructuring merchant cash advances or other cash advances is very possible.Unscrupulous lenders relying on business failures, however, often refuse to negotiate fair terms – they just want to extract maximum payments before you default. In those cases, formal legal debt restructuring proceedings may offer the best path forward.
What About Debt Consolidation for Cash Advances?
Some business owners think taking out a new loan to pay off cash advances is a good debt consolidation strategy. But cash advance debt generally has very high interest rates, so this tactic – often called “stacking” – rarely works out well.You end up paying off the old cash advances but taking on new ones with additional fees and interest charges. Unless you also fix the underlying business issues, you just dig a deeper hole resulting in even less affordable payments down the road.Debt consolidation can sometimes still help if you use lower-interest financing like a bank loan or SBA-backed loan to pay off cash advances. But you need a very clear repayment plan – otherwise, you risk defaulting on the new debt too.
Protect Your Business Through Cash Advance Debt Restructuring
Struggling to repay merchant cash advances or other expensive cash advance loans? Before it’s too late, look seriously into restructuring options. Work openly with lenders to negotiate affordable payments that work for both parties.With professional guidance from experienced business debt relief experts, protective legal proceedings can also compel fair cash advance debt restructuring terms.The most important thing is being proactive. Don’t ignore the problem and hope it goes away – take action early to restructure unaffordable debts. Protect your business finances so you can regain stable footing.There are always solutions for businesses willing to address issues head-on. With a practical cash advance debt repayment plan in place, you can stop worrying about past financing mistakes and focus on future success.