How One Manufacturer Negotiated Debt Relief to Keep Its Doors Open
When business slowed to a crawl last year, J&S Manufacturing faced a harsh reality – without an influx of cash or new business, they would likely have to shut down permanently. “We saw orders drying up left and right as clients cut back on spending,” said Jim Thompson, J&S’s CEO. “Within a few months, revenue was less than half of what it was pre-pandemic.”
The abrupt change left J&S struggling to make payroll and payments on their loans and lines of credit. As Jim describes it, “We had all our eggs in one basket when COVID hit, and that basket got smashed.”
-After attempting to negotiate with their creditors on their own for several months with no success, J&S eventually turned to a debt relief company for support. “We just didn’t have the expertise or bandwidth to effectively negotiate complex settlements. The debt relief company took all that off our plate so we could focus on operating the business,” Jim explained.
Choosing a Legitimate Debt Relief Company
With so many debt relief companies making dubious claims, J&S moved cautiously in vetting potential partners. They specifically avoided companies that:
- Promised to make debt “magically go away” or stop all collection calls immediately;
- Pushed a “new government program” to eliminate personal debt;
- Guaranteed they could settle debt for pennies on the dollar without reviewing individual accounts;
- Instructed them to stop communicating with creditors.
“If it sounds too good to be true, it probably is,” Jim said. “We ultimately went with Rhodes Debt Negotiation because they took the time to understand our specific situation.”
Rhodes reviewed all outstanding debts and developed customized proposals for each creditor, rather than making blanket promises. “It was clear they did their homework on the accounts and had a lot of experience getting deals done,” said Jim.
-Negotiating with an Empathetic Approach
J&S and Rhodes decided an empathetic approach would give them the best shot at striking a deal with creditors. “We focused the conversations on how COVID significantly reduced business, making it impossible to meet existing payment terms,” Jim explained. “We made it clear we wanted to pay what we could, but needed some compromise to avoid bankruptcy.”
Tapping into the financial hardship J&S faced made creditors more willing to negotiate – after all, partial payment is better than no payment at all. “We had to show them we were truly in distress. Most understood and wanted to work something out,” said Jim.
J&S and Rhodes made sure not to lose sight of what payment amounts were feasible, however. “If we offered too much, we’d be back in the same hole in 6 months,” Jim said. “We started the negotiations pretty low, knowing we’d eventually land somewhere in the middle.”
Securing Agreements in Writing
After months of discussions, J&S successfully negotiated discounted settlements with all outstanding debts. With Rhodes’ help, they achieved an average 67% reduction across the accounts.
Once new terms were agreed upon, getting everything in writing was crucial. As Jim put it, “Verbal agreements don’t mean much – creditors can still send an account to collections even after a handshake deal.”
-To date, J&S has formal settlement contracts in place with their bank, two equipment financing companies, and their largest vendor. “The written agreements give us confidence and prevent misunderstandings down the road,” said Jim.