Regardless of which marketplaces your business deals with, keeping on top of your finances should be a top priority. Any failure to do this could land you in hot water with creditors, and nobody likes to spend their afternoons in a courtroom. So, you need to take precautions early and research all the options available to you before money becomes too tight. Don’t stress too much though, businesses encounter problems like this all the time – you’re certainly not alone.
Considering that, this article has been written to highlight all the different avenues you might entertain when dealing with business debt. Sometimes things just get a little out of control, and unfortunately, seeing this coming is often troublesome. So, if you want to learn a bit more about the moves you can make to keep your head above water during these troublesome times, pay close attention to all the advice presented in this post. Hopefully, you’ll avoid that mental breakdown you appear to be heading towards.
How do I get rid of business debt?
Getting A Business Loan
If your business is actually running pretty smoothly, then cash flow could be your main issue. Luckily, this is easily remedied, and all you need to do is take a trip to your bank to arrange a loan. So long as they can see your company is doing well, they’ll understand the cash flow problems and offer you a suitable solution. As with any form of lending, just make sure you read the contract properly and work out exactly how much interest is being charged. In most instances, the rate is relatively low.
Apply For Business Credit Cards
You want to avoid fighting debt with debt if you can, but so long as you know of a huge payday your company will achieve in the near future, applying for credit cards to see you through really isn’t the end of the world. Businesses usually get lower rates than the general public, so your annual APR could be almost insignificant (somewhere around 10%). Again, just ensure you read contracts thoroughly, and only accept cards from reputable specialists whom you know have a good track record. Any of the major high street names are fine.
File For Bankruptcy
Lastly, if there really is no light at the end of your tunnel, and the firm you created is almost broke with no hope of ever paying creditors the money owed, using a London-based, Paris-based, or Chicago bankruptcy attorney to file the appropriate paperwork could be your best move. While this means your creditors will lose their right to chase you, it’s going to save them money in the long run, as you know very well you’d never have made the repayments. Be warned though, filing for bankruptcy is no insignificant move, and you could see your name listed in local newspapers (this is customary). Also, you’ll lose everything except that which you managed to hide away, and you’ll be forbidden from setting up another company in your name.
What happens if a business can’t pay debt?
Debt Collection Agencies
The first thing that will happen is that you will be contacted by debt collection agencies. These agencies specialize in recovering payments from people who are behind on their payments and have been hired by the original lender or creditor. The methods used by these agencies vary from sending letters and making phone calls to more aggressive tactics such as visiting your home or place of business. It is important to remember that even though the debt collection agency has been hired by the original lender, they do not have any legal authority over you and cannot take any action against you without your permission.
If you do not respond to the requests of the debt collection agency then it is likely that your creditor may file a lawsuit against you in an effort to recover their money. Depending on the amount of money owed, they may also seek other legal remedies such as liens on property or wage garnishment. These measures can be extremely damaging for businesses as they can affect their ability to borrow money in the future and potentially damage their reputation among customers and suppliers.
Credit Score Impact
Finally, unpaid debts will also have an impact on your credit score which can seriously hurt your business’s ability to secure financing for operations or expansions in the future. Unpaid debts stay on your credit report for up to 7 years so it is important to try and pay off any outstanding debts as soon as possible before it starts affecting your credit score too much.
At the end of the day folks, being in large amounts of debt is never going to be a pleasant experience, but you do have a kind of “get out of jail free” card in the form of bankruptcy, so don’t lose too much sleep. These things happen.