The goal is to establish a plan that allows the company to eventually satisfy creditors sufficiently to emerge from bankruptcy and resume normal operations on stronger financial footing. However, most bankruptcies aim to liquidate unaffordable debts rather than rehabilitate the underlying business. Many businesses struggle with uneven cash flow and need to use short-term financing to cover essential business expenses. Any debt taken without a clear understanding of how it will be repaid, and how the costs affect the businesses’ bottom line. When you declare bankruptcy, the judge who presides over your case will work with you and your creditors to lay out a new plan for the repayment of your debts.

Bankruptcy Protection Laws

A good cash flow management strategy requires more than keeping an eye on today’s numbers. Start by building an emergency fund—set up regular payments into the fund to grow it consistently. And make sure you’ve negotiated flexible repayment terms with your lenders, so if cash gets tight, your payments can adjust to a more manageable level. Debt consolidation can feel a lot like pressing the reset button on your business finances. By combining multiple loans into a single loan with a lower interest rate, you reduce your monthly payment burden.

• To be sure that you’re getting the best offer, you can prequalify with several business lenders to see what loan features they offer you.
• A business debt consolidation loan helps you streamline all your existing business debts into one loan with one monthly payment.
• Lenders don’t want you to default on your loan, and recouping their losses is costly.
• Some methods of small business debt management are fairly obvious, while others are more complex.
• Corey divides his time between meeting with clients and working behind the scenes to build retirement plans that stand the test of time.
• Also double check whether you’ve provided a personal guarantee on the account.
• This is a type of debt schedule to help you visualize and pay off your debt.

Pros and Cons of Business Debt Consolidation Loans

“If a team member sees that a process can be done better, opinions and ideas are genuinely heard.” Wendy and her husband, Bobby, have three children, Victoria, Allison, and Mila. The family loves visiting Freedom Park/Carowinds in the summer, as well as trying new Charlotte restaurants and checking out live bands throughout the year. As the Director of Insurance Planning, Jonathan helps clients understand the important role insurance plays in their retirement, tax and legacy planning. He partners with advisors to create tailored insurance plans to protect clients from potential risks they may face during both their working and retired years.

How to Decide if Debt Consolidation Is Right for Your Business

Regardless of the type of loan, debt consolidation can be an effective way to simplify your monthly repayments and reduce the interest you’re paying on your debts. Usually, they have the experience and means to weed out inefficiencies in your business’s debt reduction strategy and can even negotiate better repayment terms with your lenders. This is an option that is not commonly known and rarely communicated by debt servicing agencies, but plausible for businesses of all sizes to pursue. In all cases, lenders are making the same considerations as other business owners. Outcomes may include reversing or reducing administrative fees, lowering interest rates or changing payment schedules — all of which can be beneficial.

• Any company we affiliate with has been fully reviewed and selected for their quality of service or product.
• If you have an SBA loan or microloan and are unable to pay the full amount, you can also submit an “offer in compromise” if you have ceased operations and liquidated your assets.
• And make sure you’ve negotiated flexible repayment terms with your lenders, so if cash gets tight, your payments can adjust to a more manageable level.
• Regardless of the type of loan, debt consolidation can be an effective way to simplify your monthly repayments and reduce the interest you’re paying on your debts.
• The Small Business Administration (SBA) reports offering over $390 billion in debt relief to aid small businesses battered by the pandemic.

When To Look for Business Debt Relief?

He further distinguished himself by earning the Certified Investment Management Analyst (CIMA®) designation from Yale University and becoming a Certified Financial Professional (CFP®). These credentials underscore his dedication to professional excellence and his unwavering commitment to guiding clients through their financial planning journeys. Outside of his professional endeavors, Pat cherishes time with his wife, Caitlin, and their children, Callan, Rory, and Hazel. He finds joy in coaching their teams, playing golf, and exploring new destinations around the globe. Pat’s passion for family, sports, and travel adds a vibrant dimension to his life, making him not only a trusted advisor but also a well-rounded individual. Reach out today for high-quality business debt management strategies.

No, debt restructuring is designed to preserve your business, not take it away. In cases where debt is exchanged for equity, your ownership share may reduce, but it doesn’t necessarily result in loss of control. This list is your cheat sheet—it keeps you focused and sharp during talks. Include how each point benefits both your business and the lender, such as a lower interest rate that can lead to more disposable income for consistent payments. At times, a quick infusion of cash is the only way to scale and help a company realize its ultimate promise. Entrepreneurs should be careful, however, in buying into the myth that venture capitalists are the only place to turn to when a business is stretched thin.

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One of the most significant disadvantages of consolidating business debt is that you may pay more overall. Although you may qualify for a lower interest rate, this is not guaranteed. You still have to repay the full debt amount plus the loan origination fee and business debt reduction other costs. Depending on the new loan term, interest also may accrue over a longer period, resulting in a higher overall cost of borrowing. Our editors are committed to bringing you unbiased ratings and information. We use data-driven methodologies to evaluate financial products and companies, so all are measured equally.