How to Select the Best Debt Relief Scheme for Your Business

Entrepreneurs accumulate debts when they cannot repay their creditors, existing loans, and outstanding bills on time. Many of them do not generate sufficient revenue from their sales to maintain adequate cash flow.

Others often overuse their business credit cards without considering the consequences—most entrepreneurs even fail to look for and exploit alternative income-generating sources for their businesses. As a result, they end up with a cash crunch that adversely affects their market operations. Entrepreneurs frequently get reminders from their creditors, and lenders ask them to repay their outstanding dues.

Otherwise, they might threaten to take suitable legal action against them. This can tarnish their reputation in the market.

How can entrepreneurs evaluate the best debt relief scheme for their businesses?

When entrepreneurs are in severe financial trouble, they can opt for various debt relief schemes. These could include applying for a merchant cash advance, a loan consolidation program, debt restructuring incentive, or a cash-out refinance. All of these schemes can help them to meet all of their outstanding business obligations on time. Moreover, entrepreneurs will even be able to improve their cashflow position. However, they first need to assess their present situation and do some research. Only then can they determine which is the best debt relief scheme for them. In doing so, they have to:

  • Find out how much money their currently owe to their creditors and lenders
  • Determine their present credit score and creditworthiness in the market
  • Identify which debt relief schemes can cater to the financial needs of their businesses
  • Get a thorough understanding of the terms and conditions of each of these schemes
  • Assess the market reputation of the companies who are willing to offer the debt relief schemes
  • Determine what percentage of their outstanding debt will companies be able to waive under each scheme
  • Determine whether or not the fees thedebt relief companies charge are reasonable
  • Enquire whether the fees are chargeable after the companies settle the entrepreneurs’ debts with their creditors
  • The initial amount they need to pay to their creditors and lenders to restructure their debts
  • Find out the payment schedule, interest, and time limit within which they have repaid the remaining debt

Types of debt relief schemes for entrepreneurs

Entrepreneurs can avail any one of the following debt relief schemes to improve their financial position:

  • Merchant cash advances on the total volume of their customers’ credit card sales,
  • Debt restructuring programs where creditors agree to low existing repayment amounts, interest rates and reschedule of the time limits,
  • Debt consolidation schemes whereby lenders combine various small loans into one with a higher interest rate, and
  • Debt management schemes which involve lowering interest rates and waiving other charges on the outstanding credit card dues.

Opting for the best debt relief scheme can enable entrepreneurs to get their business finances in order. They will be in a position to clear all other outstanding dues with their creditors and lenders. In the process, they can avoid bankruptcy. However, when it comes to selecting the right scheme, they need to understand its salient terms and conditions. The scheme should meet their specific financial needs, and companies offering it should be reliable with proven track records.