According to the Small Business Association, small business owners hold more than $17.7 trillion in debt in the United States. Broken down, this amounts to an average of $195,000 per business.
Now, this sounds like a staggering amount of money, but there are ways of managing debt in order to keep a small business afloat. The best strategy is to build a healthy cash flow situation, but if you need a helping hand, there are always business debt relief options to consider.
So, what is debt relief and how does it work for businesses? Find out more in this blog.
Business Debt Relief: How It Works
In the United States, business owners have access to a number of different debt relief programs to help them pay down their debts. Most of the time, you’ll need to hire a debt relief company, such as Solid Ground business debt relief, to help you determine the right plan for paying off your debt.
Some of the most common methods for reducing debt include:
- Consolidating your debts
- Reduced interest rates
- Refinancing business loans
- Applying for fee waivers
- Extending your loan terms and more
But if you’re considering a debt relief program, here are a few options to choose from:
The premise of a debt settlement program is to come to an agreement between debtors and creditors to accept a lesser debt repayment amount. They can either agree to a lesser repayment amount per month or a lesser amount paid in full.
Most of the time, your business will already need to be delinquent in repaying its bills for a decent amount of time before a creditor considers this option.
A debt management plan (DMP) is an excellent long-term option for paying down debts. Basically, this option requires monthly payments to a credit counseling company which then distributes this sum of money between the creditors you owe money to.
As part of the terms of the agreement, your creditors may agree to reduced interest rates or waived fees.
This is an alternative to a debt relief program. This option means seeking out the assistance of a credit counselor to review your finances.
They will take a close look at your budget, income, and the debts you owe. After that, they’ll come up with the best budget to assist you in paying off your debt in a decent timeframe.
Debt consolidation means combining all of your debts (from different sources) into a debt consolidation loan. This is a good option for lowering the amount of interest you repay as well as the monthly repayment.
This type of loan means you can combine several different forms of debt such as credit card debt, personal and business loans, medical bills, etc.
This is often a last resort option if you have no way to repay your debts. But bankruptcy isn’t as bad as it sounds or as many people perceive it to be.
You could opt for Chapter 7 bankruptcy, which means liquidating all of your assets in order to repay your debt. Or, Chapter 13 bankruptcy which means creating a repayment plan to pay off your creditors — this option allows you to keep your assets as long as you stick to your repayments.
When Is It Time for Debt Relief?
Here’s when it’s the right time to consider a debt relief program or any of the other forms of debt relief mentioned above:
- You’re contemplating filing for bankruptcy
- You’re very behind on loan repayments or credit card bills
- You cannot afford payments and will soon fall behind on your bills
- You’ve tried to implement changes and manage your own debt, but cannot make substantial process
Bear in mind that debt relief might not work for you if you’re not committed to long-term debt management.
Learn to the Manage Your Finances Like a Pro Seeking out business debt relief is a hard pill to swallow for any first-time business owner. But if you want to save the business that you’ve worked so hard for, it’s important to put your pride aside and seek out the professional help you need.