Seeking Small Business Debt Relief from Lenders[yoast-breadcrumb]
Seeking Small Business Debt Relief from Lenders
Hey there! If you own a small business, you may have found yourself in a tricky spot with debt. Loans and credit cards can pile up quickly, leaving you struggling to keep up with payments. But there are options out there to get debt relief and breathe easier again! This article will walk you through some strategies to lighten your small business debt load.
Consolidate Multiple Loans into One
If you have multiple business loans or lines of credit, consolidating them into a single new loan can make repayment way simpler. You’ll only have one monthly payment to worry about, and may even score a lower interest rate. Online lenders like Fundera and LendingTree offer debt consolidation loans up to $500,000 or more. Banks also provide consolidation loans, often with lower rates but stricter eligibility rules.
Snag an SBA Loan
The Small Business Administration (SBA) guarantees loans given out by approved lenders, helping businesses access funding. SBA 7(a) loans go up to $5 million and can be used to roll multiple debts into one. Perks include low rates, long repayment terms, and even loan forgiveness options. Check the SBA website for updates on COVID-19 relief lending programs.
Ask Lenders for Relief Options
If you’re struggling with payments, tell your lenders! Many will work with you to make repayment more manageable. They may be able to lower interest rates, extend loan terms, or let you pause payments for a bit. Be proactive in asking for help – the sooner the better. Under the CARES Act, lenders had to provide 6 months of payment relief on existing SBA loans.
Explore Debt Settlement
Debt settlement involves negotiating with creditors to pay a lump sum that’s less than what you owe. This can save a lot of money, but may damage your business credit. Debt settlement firms like Freedom Debt Relief charge fees but do the negotiating for you. Or you can try DIY settlement by contacting creditors directly.
Prioritize Paying Down High-Interest Debt
The debts costing you the most in interest should get priority in repayment. Pay more than the minimum on high-rate credit cards and loans, while just paying minimums on lower-rate debts for now. This “debt avalanche” method saves money on interest and clears debts faster. Apps like Debt Payoff Planner help optimize payoff order.
Use Profits to Chip Away at Debt
When possible, use some of your revenue to pay down principal on loans and credit lines. Even an extra $100 or $200 a month can make a dent. Building this habit now leaves you less vulnerable to rising interest rates down the road too.
Lean on Community Support
Don’t go it alone in tackling business debt! Connect with other local business owners, including through groups like the SCORE Association and Small Business Development Centers. Peers who have been there can offer insights on managing debt. Plus, you can find strength in community.
Explore Personal Funds if Needed
While not ideal, you may opt to pay some short-term business debts using personal credit or savings as a last resort. This can buy you time to improve cash flow and pursue longer-term solutions. But have an exit strategy to rebuild personal funds and keep business and personal finances separate going forward.
Cut Expenses Where Possible
Getting business debt under control may require some belt-tightening day-to-day. Look for areas to trim spending, like subscriptions, software, payroll, inventory, etc. You want to find meaningful savings without cutting things that will cripple your operations. It’s a balancing act for sure.
Sell Assets Not Critical to Operations
Liquidating non-essential business assets is a strategic way to pay off debts quickly. You can sell equipment, company vehicles, unused real estate, securities, etc. Holding a liquidation sale or auction opens up more potential buyers too. Just be sure to sell assets wisely, keeping what you need to stay in business.
Negotiate Better Repayment Terms
Don’t just accept the loan terms you’re given! It never hurts to negotiate, especially if you’ve been a loyal customer. Ask lenders about getting lower rates, longer repayment periods, interest-only periods, or other concessions to make debt more affordable and manageable. The worst they can say is no.
Shift Focus to Profitability
The best long-term solution for business debt woes? A profitable business! Refocus your energy on boosting sales and improving operations. Even modest gains in profitability make debt repayment easier to handle over time. Master the basics like customer service and cash flow management too.
Whew, that was a lot of tips! Dealing with business debt is tough, but take it step by step. Stay organized, be proactive, and don’t lose hope! With some diligence and creativity, you can find the right debt relief solutions for your small business. Here’s to smoother sailing ahead!