12 Steps to Paying Off Pandemic Debt to Save Your Small Business
When the economy collapses due to a pandemic, small business owners struggle the most. Now companies are reopening across the country, but the challenges remain. You are probably thinking of the money and the debt your business has amassed.
If you haven’t been able to pay your business debts, your creditors may turn to you. They can do this by threatening you or your company with legal action.
There is perhaps nothing worse than having debts of all kinds. You feel terrible when dealing with business debt. Your current financial situation is unsustainable due to the pandemic.
You are about to file for bankruptcy and potentially lose your small business entirely.
You can’t deny your small business debt. But there is no reason to lose hope. You can make efforts to get it under control or find other ways to get out of it. If you’re dealing with small business debt, I’ll walk you through a few steps to pay off your debt and get your business back on track.
1. Find a commercial debt counseling service
Commercial debt counseling is no different from regular credit counseling programs organized for individuals. Commercial credit counseling can help you eliminate debt and help entrepreneurs avoid bankruptcy. A certified advisor creates an affordable repayment plan after reviewing the organization’s financial health.
2. Take out credit from your personal or business savings account
Entrepreneurs can withdraw cash from their personal or business emergency fund to help eliminate debt. Once they have paid off the debt it will help improve their credit score. But when you have overwhelming debt, you may not be able to get rid of it by taking money from your personal savings account.
3. Negotiate with the creditors
Negotiating with your creditors to bring the outstanding balance down will allow you to repay it. If you can hire a professional debt arbitrator, they can significantly reduce the outstanding balance to a reasonable amount.
4. Opt for corporate debt consolidation
If you feel that you are unable to repay your debt through the financial advice of a credit advisor, you can take out a commercial debt consolidation loan. Taking out a commercial debt consolidation loan is not as easy as taking out a personal consolidation loan because it usually requires a much larger amount to cover the business organization. You need a commercial budget to ensure timely repayment of the loan to the lender and they will understand that you can make your business thrive. If the lender agrees, you can take out a loan at a lower interest rate and then combine your payments into a single monthly commitment.
5. Hire a probate company to pay off your business debts
You can pay off business debts when you are faced with a heavy burden from defaults and defaults by contacting a reliable debt settlement firm. The negotiator can convince your creditors to reduce the outstanding debt amount by 40% to 60%. Paying back the debt amount can be helpful. Usually when they see that you can opt for bankruptcy, creditors will agree to the proposal. This could result in a greater loss if they do not receive any money after paying off your secured loans. With a debt settlement, you have to pay the entire settlement amount at a flat rate.
6. Re-examine your small business budget
It is likely that you have been on a budget to keep your finances on track. Since you have failed with this budget, it is time to review again. Allocate a portion of your budget to all variable costs such as manufacturing materials. Keep track of your pennies so you know what you are spending your hard-invested money on.
7. Try paying off high interest debt
The first thing you need to do as a business owner is identify all aspects of your business that have owed you and attack them directly. If customers don’t pay back on time, your expenses will skyrocket. If you want to avoid all of this, you need to hold your customers accountable. Consider stepping up collection efforts so you can free up cash and focus on your high-interest debt. Selling unused equipment can also make sense.
8. Lower your expenses
When you are struggling to pay off your business debts, your main job is to reduce your expenses. You can use this extra money to pay off your small business debt. This is helpful in quickly paying off the amount owed and in repairing your bad credit history.
9. Avoid transferring your company’s assets
So desperate for help are many entrepreneurs that they transfer their company’s assets to friends and family to hide them from creditors and lenders.
However, lenders are used to tracking down these transactions and getting the property back. You can face civil or even criminal charges of fraud because of your actions.
10. Register for bankruptcy
You still have options when all else fails. When a small business can’t manage its debt, it may be time to sell the company, liquidate its assets, or file for bankruptcy. Try asking a lawyer for help.
11. Renew your insurance policy
It can be difficult to get insurance for your business when filing for Chapter 11 reorganization or Chapter 13 bankruptcy.
Many insurance companies are cautious about providing cover to companies involved in these cases.
So before you file for bankruptcy, you should renew your insurance contract. If you continue to make regular payments, the insurance company will not be able to cancel your policy.
12. Sell your business
When all else fails and bankruptcy is out of the question, you may need to consider selling your business to make ends meet.
But ideally this will not be necessary. You should be able to repay your small business debt.
In today’s economy it is very difficult to be a small business owner. When you’re starting a small business, cash is hard to come by and credit is hard to come by. With the economy stalled due to the pandemic, dark clouds still hover over the prospect of a solid economic recovery. Lenders are unwilling to lend loans at a reasonable interest rate because they fear a credit collapse. So in order to fund your small business, you either need to take out a high-interest loan or take out multiple small loans, which puts you economically at a disadvantage. After the initial cost of starting your business, you need to start it. This also requires a certain amount of funding. However, you cannot go on running into debt as if you had amassed an enormous burden of debt; no simple debt relief option will be useful. Your only choice is bankruptcy, which can seriously affect your creditworthiness.
So before you get into big trouble, lower your small business costs so that the funding you need is minimal. In addition, cost savings can successfully save you money and repay the debt you incurred in starting the business.
Lyle Solomon has considerable litigation experience, as well as extensive practical knowledge and expertise in legal analysis and writing. He has been a member of the California Attorney’s Office. He graduated from the University of the Pacific’s McGeorge School of Law in Sacramento, California in 1998 and is now a Principal Attorney for the Oak View Law Group in Rocklin, California.