Data from the U.S Bankruptcy Courts reveal that, there were about 775,578 bankruptcy filings in 2018, and about 796,037 in the year 2017, a drop of 2.6%. Availing 'business debt relief', can help you solve your problems instead of filing for bankruptcy.
Abraham Lincoln once said, “Discourage litigation. Persuade your neighbor to compromise whenever you can. Point out to them how the nominal winner is often a real loser, in fees, expenses, and waste of time.” Business debt relief is structured on the same concept.
Business debt troubles can arrive at any time and in various degrees of crunches. They can arise due to delays in production, unexpected market fluctuations, product demand deficiency, or even due to mismanagement of funds.
Whatever the reason, business debt is an unavoidable way of life for businesses. Yet, there are many relief options, ranging from the simple to the most complicated.
Often though, bankruptcy is seen as the last and only choice. However, it spells the end of the business, so this option is not always the best one. Let us look at the reasons for looking at other options and also at the things they entail.
Bankruptcy as an Option
Though it may sometimes seem that there is no hope for your business, and maybe bankruptcy is your best available option, this may not necessarily be true.
Always evaluate all your options before you file for bankruptcy, because this particular debt relief option has following disadvantages:
- Bankruptcy often involves tedious paperwork. First, the loss of your business, then all the red tape. Can you handle that?
- To top your already problematic liquidity crunch, bankruptcy comes with other additional expenses.
- Also, there is possibility that your individual wealth may be dragged into the business wealth controversy. In other words, you may have to file for individual bankruptcy rather than company bankruptcy.
- Court appointed trustees oversee the whole process, and this means that you may find a fire-breathing dragon breathing down your neck all the time.
- Last but not the least, think of all the frequent court trips that you will have to make.
Now, are you really up for bankruptcy? If you are lukewarm, consider the following relief option advantages, before you consider any one as a solution to your business debt problems.
Why Relief Options
First and foremost, with relief plans, you can avoid all the hassles of bankruptcy and still keep your business afloat. It lowers the business debt levels and help the company get right back on track.
Various companies offer their expertise, resources, personnel, legal advice, and proper debt resolution plans to help your business get rid of debt fast. The best part about debt relief is that it makes life easier for the business through effective management, and also helps to start it again with a clean slate.
Various Available Options
There are a multitude of debt relief programs available in the market today. Some of them are given here:
Business Debt Restructuring
Now here’s an option that can help you avoid a financial crisis, and can aid you in getting back on track after one. Business debt restructuring helps improve the company’s liquidity by constructing a scenario of fair and equitable creditor payments, at times of liquidity crisis.
It can help you satisfy your creditors with payments suiting your currently strained budgets, can reduce the creditor negotiation time, and avoid unnecessary legal fees. As a bonus, this strategy can retain good vendor relations, and aid in rebuilding your credit and credibility. It requires the negotiation expertise of good debt reduction companies.
Asset Based Lending
Business debt can arise due to the liquidity crunch caused by unpaid debtors. If unencumbered assets, such as accounts receivable, inventory, equipment, and real estate are blocking your funds, you can deal with your crisis with asset based lending.
You can use this technique (with these assets as collateral) to turn around your business, and propel it towards financial growth. This cash can be used for purchases, paying off creditors (debt settlement), and also to meet seasonal demand expenses.
Consolidation artificially increases the debt settlement period for the business in crisis. It involves clubbing together all the individual debts, in order to make one single payment for all of them.
Many a time, this single payment ends up being a lower amount, than when all the payments were made without the consolidation. This reduction strategy effectively buys you some more time to think of other options.
For small debts, this option is even more viable, as it helps in the credit card debt settlement process, lowers payments, and increases time duration. All in all, as a small strategy, it improves the debt ratios and the debt to income ratios of a small business.
There are many other relief programs, like debt assistance in the form of relief grants and debt consolidation programs, that the business must review before it takes a final call on what to do with its debt. Evaluate all the possible business debt relief options available to you and make the most rational choice.
Disclaimer: The information given here is for reference purposes only and does not directly recommend any specific financial course of action.