How To Use Business Debt Restructuring
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On the surface this appears to be a difficult task. How is it possible to restructure your business debts to suit your needs while keeping your creditors happy? Let's first of all take a look at what exactly takes place in a business debt restructuring.
When people talk about chapter 11 bankruptcy for businesses, they often refer to the restructuring of the debts of the company in addition to the protection from creditors that this form of bankruptcy allows for. The reality is however, that chapter 11 bankruptcy is typically not a suitable choice for small to medium size businesses that are trying to remedy a situation of excessive debt and debt payments.
Upfront legal fees alone can run in the $10,000 to $15,000 range. And that is just to get the ball rolling. Once your company goes into chapter 11 bankruptcy you will also lose significant control over the day to day operations. Do you really want a receiver running your business? Probably not.
What you (and your business) likely want is the business debt relief that comes with chapter 11 bankruptcy without the legal costs, hassles and loss of control that comes with it. Fortunately there is an option. Business debt restructuring.
The goal of business debt restructuring is typically to accomplish three things.
1. To reduce the overall amount of debt that is owed by the company.
2. To reduce the monthly debt servicing payments of the company.
3. To satisfy the needs of the creditors so that your business can continue to work with them in the future.
Fortunately these three goals can be achieved simultaneously through business debt restructuring.
Let's look more closely at the third goal above as a starting point. We mentioned earlier that business debt restructuring can be a win win situation for both your business and for your creditors. Here's how.
Ultimately your creditors want to be paid what is owed to them. Unfortunately your company finds itself in a situation where it cannot meet its debt obligations. A common fallout of a situation like this is that the creditor sends your account to collections and when your business still can't pay, the situation may progress into a law suit. Money is spent by both sides on lawyers, court fees etc. The relationship between the debtor and creditor evaporates and in the end no one really wins.
Offering to work with your creditors rather than against them is really what business debt restructuring is really about. Once you (or preferably a qualified professional) has fully assessed the financial health of your company, a restructuring plan for your business debts can be implemented.
Aside: If you would like to receive a free, no obligation business debt analysis, we recommend a company called Curadebt. They work closely with a team of lawyers, financial advisors, lenders, credit arbitration experts and other professionals to help businesses restructure their debts. Visit them here now.
The next step is to speak to your creditors about restructuring. On the surface it is really fairly straight forward. Creditors are given two choices really.
1. If they need/want to settle the debts right away then they must be willing to take a percentage of the total debts as full payment.
2. Or, if they want to receive a larger portion of the debts that are owed to them they must be willing to receive small payments over a longer period of time.
Here is a very simple example of how business debt restructuring works.
Let's say your business has two creditors that are each owed $20,000, for a total of $40,000. You approach both creditors about restructuring the debts. Business creditor #1 needs/wants cash right now. In exchange for being paid out right away they are willing to settle for $5,000. A savings to your company of $15,000. Business creditor #2 on the other hand wants to be paid in full. In exchange they are willing to spread the payments of the debt over a 60 month period. This will help your business substantially with its cash flow situation.
Knowing what to accept from your creditors is of course vital to the success of your business debt negotiation plan. We strongly urge our visitors to seek professional help in this regard. At the very least we recommend that our visitors speak to an experienced debt negotiator before implementing any business debt solution.
One company that we often suggest to our visitors offers to prepare a free initial business debt help plan, with no further obligations. If you wish you can visit them here for more information.
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