Deep in Business Debt? - Page 2 of 2

Deep in Business Debt?

you’re being sued, and collection agencies are ringing the phone off the hook, your business is a prime candidate. Then identify which creditors to restructure. Those that are most critical to your company’s survival should be handled first. You can tackle debt restructuring on your own, especially if you can afford to pay your past due debts within three to six months, but if you need more than a year to make repayment, contact a professional debt restructuring firm for help.

2. Determine your monthly budget: You want to satisfy your debtors, but you also want to be realistic about how much you can afford, so project what you are capable of paying toward these debts on a monthly basis. The workbook includes a worksheet to help you calculate your revenue and expenses. But be conservative when making projections to allow for a cushion in the event of a cash flow crunch or economic downturn. You can use the payment plan template, also included in the workbook, to list your written offers of payment to creditors.

3. Prove your hardship: Many creditors are willing to work with you in paying back debts if you can establish a hardship. Prepare a letter that explains the circumstances under which you have been unable to meet your financial obligations. Perhaps there has been a serious illness or death in the family. Maybe a disaster such as a fire or flood has seriously threatened the life of your business, or the loss of a big customer or key employee has delivered a severe blow to profits. Whatever the reasons, detail them in your hardship letter on your company letterhead. Include financial information from your tax returns, balance sheet, profit and loss statement, or other documents that may help to support your situation. Just be prepared that a creditor may request to see these documents, so make sure they accurately verify what you have reported.

4. Wait for a response: Getting creditors to respond to your settlement offer takes time, so be patient. Creditors are unlikely to settle quickly or easily and each one will respond differently. Some may demand payment in full and immediately. Others may require that you submit financial documents to determine if your hardship letter is genuine. Don’t let this time-consuming process frustrate you. Remember that the goal is to save your business.