What is business debt restructuring? Are you facing overwhelming financial difficulties? Business debt is an ugly business, and can cause hardships on both the owners of the company, and it’s employees. Corporate debt restructuring is a solution to eliminate the problem of debt, and improve liquidity.
Often, many people are looking at business debt restructuring because they think it’ll improve their cash flow problems. Delancey Street has a number of unique financial products that can help you improve your liquidity issues.
Merchant cash advance consolidation: We can help you improve your cashflow issues by combining several of your merchant cash advances into one weekly/daily payment. Often, we can increase your term, and provide the funds at a lower factor rate. This means your daily cashflow situation is improved, and isn’t compromised by the several merchant cash advances you’ve taken.
Real estate collateralized loans: Do you have real estate investment properties? Often, people forget their biggest asset is their real estate property. When you’re looking at business debt restructuring, it’s probably because you are having financial cash flow issues. By getting access to additional capital via hard money loans, you can improve your financial situation and avoid business debt restructuring.
Invoice factoring: This is another great example of a financial product that can help you get access to capital, and improve your overall business liquidity. Instead of restructuring your debt, this financial tool can help you improve the overall health of your business.
Are there any benefits to a commercial debt restructuring program?
- You can potentially avoid bankruptcy
- You can satisfy creditors based on what you can afford
- Reduce your debt, and stretch it over time
- Spend less time dealing with creditors, collection agencies, etc
- Spend more time generating revenue
- Retain management control
- Avoid legal fees
- Rebuild your credit potentially
Bankruptcy should be considered the last possible option. Your goal should be to remain outside of bankruptcy court. Filing bankruptcy is expensive, the cost is – at a minimum – $75,000. Most small and middle market companies will wind up in Chapter 7 liquidation. 75% of all Chapter 11 bankruptcy proceeds go to the attorneys and other parties, not creditors. As a result, virtually everyone involved – would prefer you find alternatives to bankruptcy.
For example, with Delancey Street – you can get access to alternative working capital solutions such as merchant cash advance consolidations, term loans, SBA loans, invoice factoring, and lines of credit – which can help you avoid financial distress. When you file bankruptcy, the debt is moving into the legal arena which means a lot of time and money is going to be wasted on things like responding to notices, appearing for hearings, talking with your attorneys, etc. Suddenly, your debt has increased to $100,000 or more. In some situations, collection agencies can increase the debt by 50% on the date it’s assigned to them. They can begin adding interest to the debt. Also, if you file bankruptcy, it ruins your credit score and is public.
Is it possible to negotiate your own business debts?
- Use invoice factoring to free up additional cash flow, that is currently unlocked in your invoices
- Use a hard money loan, to get access to cheap working capital at 8-10%. With a hard money loan, your real estate property gives you one of the cheapest sources of money. Often, hard money loans are repaid on a monthly basis (interest only), with the principal repaid in a balloon payment at the end of the term of the loan.
- Get an SBA loan, to refinance your existing debt, and turn it into a low APR monthly payment stretched over 5-25 years.
With all of these great options, you really need to consider what benefit there is, to negotiating your business debt. If you try to negotiate and settle your debt, it’s likely you’ll never get funding again from any lender in the future. If you have very little debt, it might make sense to simply explain your financial hardship to the lender and discuss a plan that allows your business to survive.
Fact: No lender wants to see you go out of business. While adjusting/delaying the payback isn’t something they WANT to do – it’s something they will certainly will do if they see it’ll help you survive.
What will happen if you actually try settling and negotiating your debt?
It’s likely the situation might become contentious. Your lenders might send you legal notices, citing you’ve breached the terms of the contract. They might sue your business, and you personally, in order to get their funds back.
- You will need to hire an attorney, and spend money on legal fees ($10,000 minimum)
- You will be engaged in a prolonged battle with debt collectors, lawyers, and other parties
- If you personally guaranteed the debt your personal credit score could suffer. Your business credit score will likely suffer as well.
What should you do then?
Your first course of action should be to find an alternative financing solution, like one of the many offered by Delancey Street – that improves the liquidity of your business, and allows you to survive the financial hardships you’re facing.
Most of the time, financial hardships faced by a business are a direct result of reduced profitability. By refinancing your debt through Delancey Street, you can create enough time to improve your businesses profitability – either by cutting expenses, or improving profits.
How business debt negotiations work?
Business debt negotiation works when you reach out to the various creditors and try to restructure your debts. Creditors are typically cautious about engaging in this, but if they see true hardship may consider it because the want to be re-paid. Creditors realize that cash flow problems aren’t uncommon in businesses, and so your creditors will work with you to stay afloat. If you don’t possess the necessary negotiation skills, or don’t have the time to invest in negotiating your debt, you may want to consider speaking frankly and honestly to your lenders and trying to give them as much information as possible. The most important thing to remember is that most lenders have trained representatives who understand how businesses operate. They are here to help you. Procrastination is your worst enemy.
Submit your review
I learned a lot
This was a great article