If you are struggling to pay your business debt, you might be wondering if you have options and choices to exit this predicament you’re in. Thankfully, you have choices. When you work with Delancey Street, we have a number of different financing options that can help you avoid bankruptcy and other financial issues.
- Business term loans
- Invoice factoring
- Merchant cash advance
- Small business loans
- and more
If you can’t afford to pay your business debt in full, you might try to negotiate a lower lump sum payment – a business debt settlement – with your creditor. Business debt settlement means you’ve made an agreement with your creditors to pay less than the balance due in order to satisfy the debt. For example, your creditor might agree to accept a $35,000 payment on $50,000 in debt.
This should be considered a last resort.
If you are settling personal debt, this could harm you. When you settle a debt on your credit report, it can negatively impact your credit.
When it comes to business term loans, some of them can also harm you. For example, some lenders like OnDeck require a personal guarantee. This means if you default, it could harm you and hurt your personal credit score. In some other instances, some merchant cash advance lenders don’t report to credit bureaus. As a result, if you default on the lender, it might be possible to avoid a blemish on your personal credit score. It all simply depends on who you borrowed the money from.
When a debt is settled, a creditor updates your credit report to show a status of settled, or paid settled. While settled is a better status than unpaid — any status other than paid as agreed, or paid in full, can damage your account. Because you aren’t paying your full balance, debt settlement impacts your credit score negatively. Your credit is based on many factors, so the exact impact will depend on your overall credit report.
The FICO score is a measurement of the likelihood you’ll pay back the money you borrowed. Credit score also factors into how well you pay your bills on time. FICO credit scores are a type of scoring model that helps calculate your credit score. Its used by major banks, lenders, etc. Your score also determines the interest rate, credit limit, and term, you’ll get on future credit products.
Late Payments Before You Do Business Debt Settlement
If you start making late payments before you engage in business debt settlement / during business debt settlement, your credit score might experience a precipitous drop. Many business debt settlement companies will tell you to fall behind on your payments so credits are more willing to accept a settlement payment on the debt. The theory behind this is that lenders will only settle your debt, or want to settle it, if they feel there is a risk of not getting paid. As a result, many business debt settlement companies lead you down a path where your credit score is at risk of being harmed. If the debt is unsecured, and only against the business – it’s possible your personal credit score will be untouched, but your business credit score might suffer.
Bottom line, if you feel like you need financial help with your existing merchant cash advances, we encourage you to speak to our team about other financing options we have. We can help you negotiate a better outcome by giving you other financial options, like term loans, SBA loans, merchant cash advances, and more.