One of the most significant and probably the most effective ways to manage your business debt is to negotiate with your creditors. It will help you to come up with an easy yet effective restructured plan that will help you to manage your debt successfully and efficiently.
On the other hand, negotiating with your creditors on your debt will also convey a good message to your creditors. It will show your good intent to pay off your dues to them and your desire to come out of debt. Chances are high that the creditors will understand your situation and will offer you a breather.
They may either extend the loan tenure to pay back or reduce the outstanding amount. They may also reduce the rate of interest on the amount outstanding all of which will add to your mental peace and scope to make better and more effective debt management plans.
Meet A Business Credit Counselor
You may also consult a business credit counselor for that matter before you meet your creditors.
You will get a lot of advice, tips and suggestions from them on how to negotiate effectively or aggressively with your creditors.
They will help you a lot in finding the best and easiest solutions and strategies to resolve your credit issue. They will consider all factors and cover all aspects so that you can get out of the debt trap. You will have all points formulated and ready to discuss with your creditors to negotiate and substantiate your stance.
Therefore, be prudent and invest in a professional who has a lot of knowledge about debt management.
The Contributing Factors To Consider
Running a business smoothly needs a lot of care and concerns over the purchases, recruitment, operation and sales. You may have succeeded in all these with your expertise and hard work but there may a few other external factors beyond your control that may affect your business.
• One such is the credit policy if you obtain loans from external sources. If you do not follow the terms and conditions of the banks and financial institutions you may have to bear the brunt which will eventually affect your business productivity.
• Another significant factor is the cancellation of any substantial contract by your client all of a sudden for some reason unknown to you.
• When you creditors want you to make your payments faster, you may find yourself in a fix as well if you do not have proper contingency plans.
• If your loan renewal request gets rejected by the bank, you may find it difficult to make alternative arrangements fast.
• In addition to that, there may be some disruptions in your factory leading to a sudden strike by your employees.
• Political unrest, civil strife and other factors are also responsible for disrupting the smooth going of a business.
All these factors may compel you to either cut down cost or take new loans at a probably higher rate of interest.
Failing Of Business Processes
A lot of processes are involved in the success of a business. You may have implemented all these processes immaculately to improve production and sales but sometimes it may fail and give rise to a difficult situation.
• The marketing and advertising strategies may not be as effective as you may have thought or it may have stalled in the middle of the process.
• There may be a cost overrun which may be strangling your cash flow making it difficult for you to handle the situation.
• Climatic and weather conditions may also lead to disruption in business as there may be a shortage of raw materials and labor.
For all of the above situations, there is always an effective way out and it is through proper negotiation with your creditors.
Process To Negotiate
To come out from the debt pit when you negotiate with your creditors there are a few specific processes to follow. You must reach out to your creditors in full confidence and faith. You must be well prepared for the unexpected but very clear with your intent.
• The negotiations must begin with an attempt to restructure your debt so that you can manage your debt installments in a better and easier way.
• You must play on the fact that creditors always want to recover as much as possible from the borrowers rather than losing the entire amount sticking on to their policy. They know that if you file for bankruptcy, then all their money is probably gone.
• Negotiate sternly with your creditors and make them realize that such situations are common in any business and you have proper contingency plans to deal with such situations.
• Let them know about your current financial position and the plans that you may have to improve it to pay off their loans. Make it a point to substantiate your points with proper documents such as your financial statements.
The advice of the expert business credit counselor will come handy in such situations.
Procrastination Can Be Fatal
Whenever you are in a dire or sticky situation, it is best to consult with a professional counselor whether it is in your business or for any aspects of your life and personal relations. Make sure that you do not delay in contacting the counselor. Procrastination is the greatest enemy of debt. It will lead to missed payment and accumulation of debt. In turn, you will incur huge losses on overdue and penalties on your outstanding amount only to find that the final amount outstanding against your name is several times higher than the original amount borrowed by you.
It is all due to the complex compound interest rate that is usually involved in debt and EMI calculation. This calculation is not as easy as a mathematical problem you may solve. In most of the cases, such calculations are over and beyond the understanding of an ordinary man. Such ignorance leads to a debt trap that will soon engulf you leaving you with no other alternative but to go for a debt settlement, consolidation loan or even filing bankruptcy in a worst-case scenario.
I hope you enjoyed this blog post about why negotiation is one of the best debt management strategies for small businesses in need.
Interested in more articles about debt management and settlement?
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