Business debt settlement: complete guide

Business debt settlement is negotiating with creditors to reduce financial obligations owed. This is a popular option for entrepreneurs struggling to keep up with payments due to financial hardship. Businesses now have access to a wide range of strategies and services to help them with debt relief efforts faster than ever. In this guide, we'll cover everything you need to know about this topic to ensure you make the right decision to pay off your debt.

Best Debt Settlement Companies Of 2023

National Debt Relief

National Debt Relief is one of the industry's most popular business debt settlement companies. They aim to help consumers escape debt with a comprehensive and effective debt settlement program. The company has no upfront fees and allows consumers to set aside money in a separate account to settle their debts later on while negotiating with creditors on the consumer's behalf. While National Debt Relief does not handle mortgages, it benefits many consumers struggling with other types of debt. The company has helped many consumers resolve debt in as little as 24-48 months.

Pacific Debt Relief

Pacific Debt Relief is a debt settlement company that offers services for businesses and individuals. The company has settled over $300 million in debt for its customers and may help you settle your own in as little as 24-48 months. The company is AFCC accredited. Their customers typically pay a 15% to 25% fee for the total debt they enroll in the program. This fee can make the debt settlement cost with Pacific Debt Relief significantly pricier than other services. However, its high satisfaction scores, accreditation, and extensive experience make them a valuable option for consumers, especially those who land on the lower end of the fees.

Freedom Debt Relief

Freedom Debt Relief can help consumers resolve their debt in as little as 24-48 months and stands out for its client portal, which allows customers to monitor their debt settlement progress. Additionally, they offer essential educational resources for consumers and is AFCC accredited. Consumers eligible for a settlement program will have access to customer support seven days a week; however, consumers must have unsecured debt exceeding $7,500 to qualify.

New Era Debt Solutions

This debt settlement company can match you with a qualified business debt settlement lawyer to help navigate the settlement process according to state and federal laws. The company is helpful to many consumers because it has no upfront fees and years of experience. New Era Debt Solutions negotiates with creditors to help consumers pay less on the debt they owe and can help their clients become debt-free within two to three years. The company claims to help consumers erase as much as 50% of the debt owed.

How To Find And Choose The Best Business Debt Solutions

When looking for a good debt settlement company, it's essential to research and ensures that the company is reputable, experienced, and trustworthy. Below are some considerations to help you find and choose the best one:

• Read what others say. Read online reviews to understand how others have fared with a particular debt settlement company. Reviews will give you an idea of what to expect when working with them.
• Check fees. Some debt relief companies may charge a flat fee for their services, while others may charge a percentage of the settled debt.
• Compare different services. Some companies may offer more benefits than others, so comparing is vital to ensure you get the best deal.
• Research the company. Find out if the company has a good reputation. Check the Better Business Bureau for complaints and search for reviews and ratings online.

How Can You Negotiate A Debt Settlement On Your Own?

First, reach out to the creditor or collection agency. Before you begin negotiations, you must gather all the information about your account since creditors have different policies for handling delinquent accounts. Second, create a payment plan that works for both sides by structuring an affordable agreement so that you can make regular payments and all parties receive what they want in return: reduced interest, fees waived, etc. Finally, review documents carefully before signing anything so there are no discrepancies between the agreed-upon terms outlined by both parties (creditor/collector) and yourself when settling your debt settlement agreement on your own.

How to Negotiate A Business Debt Settlement

Assess and Prioritize

The first step is to assess your financial situation and prioritize your debts. This process involves determining what has the most significant impact on your business and working to pay that off first. Any leftover money in this process is used to pay your suppliers, credit card companies, leases, or bills for business expenses.

Choose Your Offer

Before you can contact your creditors, you need to prepare an offer. It's best to attempt to settle for a specific amount of the debt owed. When working with a debt settlement company, you have a better chance of choosing an offer that appeals to creditors. Because creditors know that collecting debt will be more challenging if you go out of business, you can lower your amount owed to creditors.

Contact Your Creditors

It is common to send each creditor a letter or email, meet with them in person, or call them, depending on their preferred method of communication. Suppose you have numerous types of creditors and are still determining who to contact first. In this situation, begin with equipment lessors. Following this, move on to secured creditors and finish the process with unsecured creditors.

Sign the Agreement

If a creditor accepts your terms for debt settlement, all creditors will sign a release for the debt amount in exchange for your offered payment. Make sure to read the agreement carefully before signing it and that all creditors accept and fill out the release.

Make Your Final Payment

When making your final payments, keep a record of the following:

• amount
• difference between the amount paid and the amount originally due
• recipient
• payment terms
• the date you made the payment

How to Prioritize Business Debts for Settlement

When prioritizing business debts for settlement, it's crucial to prioritize secured debts, such as mortgages and car loans, over unsecured debts, such as credit cards and medical bills. Additionally, it's vital to prioritize debts with the highest interest rates first. Businesses should prioritize their debts with an equipment lessor (if any), their secured debts, and then their unsecured debts. When you pay the secured creditors for the property you want to maintain ownership of, assess your debts regarding any additional taxable income, wages, and benefits for your employees or business loan settlement costs you are personally liable to pay.

What Is Business Debt Settlement?

Business debt settlement is negotiating with creditors to reduce the debt owed. With this, settlers work with creditors to reach an agreement for paying off debts. Companies struggling to keep up with payments due to financial hardship turn to debt settlement. This allows them to avoid bankruptcy and maintain a clean record for the business owner. During this process, you work to get a lower payment than what you owe so your business can get back on its feet financially.

Who Qualifies For Business Debt Settlement?

This is typically available to business owners struggling to keep up with payments due to financial hardship. Businesses may qualify for debt settlement aid for:

• credit cards used to purchase business expenses
• unsecured business loans
• merchant cash advances

How Much Business Debt Reduction Might You Expect?

The amount of business debt reduction you can expect varies depending on the situation and the type of creditor involved in the negotiation. Additionally, depending on the legalities of your debt and your experience with missed payments with this creditor, your settlement amount might vary. Settlements often range between 30% and 70% of the total balance of your initial debt owed. Additionally, the amount of debt reduction may also depend on the fees that the debt settlement company charges.

Pros and Cons of Business Debt Settlement

Pros

• You can reduce what you owe creditors.
• Your business has a better chance of avoiding bankruptcy.
• You can eliminate the pressure of creditors hounding your business.
• You can repay your debts faster than you would with a debt consolidation loan, bankruptcy, or credit counseling repayment programs.
• Lenders won't send your business debt to collection agencies, nor will they "charge it off." This means you will no longer have to deal with endless calls from debt collectors after you reach an agreement.
• You can avoid the lender suing you for the money owed.

Risks of Debt Settlement

• Creditors may be unwilling to settle certain debts or negotiate to reduce the amount of debt they owe.
• Your credit score will suffer when you stop minimum monthly payments on your business debt, making it difficult to get future loans and leaving you vulnerable to lawsuits from creditors.
• Some debt settlement companies charge high fees for their services.
• If you miss debt payments, you will accumulate late fees, penalties, and charges that could do more damage in the long run.
• Settled debt accounts remain on your credit report for seven years from your first missed payment.
• When you have settled your debt with creditors, you will owe the debt settlement company.

What Is A Business Debt Settlement Company?

It is a company that helps businesses negotiate with their creditors to settle their debts for less than the total amount owed. These companies typically work with businesses struggling to pay their debts and facing the possibility of bankruptcy or other financial difficulties. The process usually involves the business making regular payments to the debt settlement company, which then uses those funds to negotiate with the creditors on the business's behalf. It's important to note that working with a debt settlement company does not guarantee that they will settle all your debts, and it can also hurt the business's credit score. Depending on the specific circumstances, many debt settlement companies can complete the process in as little as 24-48 months.

How Do Debt Settlement Companies Work?

Debt settlement works by negotiating with creditors to reduce the debt owed. The debt settlement company will contact the creditors and negotiate on behalf of the business owner to reduce the debt owed. The debt settlement company will pay the creditors the reduced amount, and the business owner will be responsible for the remaining balance.

How Much Do Debt Settlement Companies Charge?

Debt settlement companies often charge a fee for their services. The fee will vary depending on the company, usually between 15% to 25% of the original amount of your debt or a specific percentage you've agreed to pay. Regardless, always compare fees before selecting a settlement company.

Alternatives To Settle Your Business Debt

Debt consolidation

In contrast, with debt consolidation, you combine multiple debts into a single monthly payment. For instance, you can use a balance transfer credit card to consolidate debt from multiple credit cards. Before proceeding with this option, know which business debt consolidation companies are the best.

Credit counseling

You can meet with counselors to discuss your company's current budget, debt, and finances. Counselors will help you devise a personalized and strategic plan to manage your spending and achieve debt forgiveness.

Debt management plans

Depending on your counselor or debt relief program, you may consider a debt management plan. Debt management plans work by enrolling your debts in a program and making a monthly payment to the management plan. The payment is then distributed among your creditors.

Bankruptcy

You can consider bankruptcy as a last-resort form of debt relief–however, remember that this option will likely have a significant negative impact on your credit score. Understand the implications the debt settlement affect on your business.

Improve Your Finances With Camino Financial

Managing your own business is challenging, and excessive business debt and expenses are a nightmare to keep your small business running. Luckily, you can use Camino Financial as debt consolidation loans. Online lending solutions like Camino Financial can help you access the funds and knowledge you need to expand your business. Find out how to qualify for a Camino Financial loan today. Apply For A Business Loan!