Settling Your Business Debts Through Debt Negotiation and Debt Consolidation
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When confronted with financial crisis, a business must act quickly to take control of the situation before problems get worse. When stuck in debt, there are two possible options that can be done – one is through negotiation and the other is by consolidation. As a small business owner, let’s talk about how these two different business debt solutions can help you.
Business Debt Negotiation
People who are stuck in personal debt with their creditors can seek negotiation to settle their debts. The same concept can also be applied to business debts. If you’ve been behind your payments for the past three months or more, no doubt your original debts have considerably increased due to the additional interest rates and late penalty charges.
Negotiating with your creditors can enable you to cut down 40% to 50% of your actual debts. Nevertheless, before attempting debt negotiation, it’s important that you have the funds necessary to pay your creditor at once after the deal has been settled.
Will a business debt negotiation affect your credit score? A negotiation or a settlement can have a negative impact on your credit score. But as soon as your debts have been completely paid off, you can start working on improving your business credit once again without worrying about past due charges.
Will you be liable for taxes if your business debts have been settled through negotiation? Creditors are required by the IRS to report the amount of debts that have been cancelled. If the amount slashed off from your actual debts is $550 or more, you may have to pay some taxes.
Business Debt Consolidation
Debt consolidation is another solution that you can consider. By taking out a loan, you can immediately pay off all your existing debts to your creditors, and stop accruing interest and penalty charges. When this is done, you’ll be paying off your debts through your debt consolidation lender on a monthly basis. The advantage of consolidating debts is that your interest rate becomes significantly lower than before.
However, before deciding to consolidate it is a must for a business to set a definite repayment plan to ensure that he can keep up with his loan payments. Most consolidation loans have a longer repayment period that can range from 5-30 years, depending on the amount borrowed. Within this period, it is crucial not to miss or delay on your consolidation loan payments to avoid further complications.
Add to this, a debt consolidation loan is often secured with collateral. Tying up a loan to one of your properties comes with a huge risk since delaying on your payments could mean losing the property you’ve submitted.
Weighing Your Options
A business must carefully weigh his options before choosing the most suitable solution for his debt problem. Regardless of your choice -debt negotiation or debt consolidation- the important thing to remember is to keep up with your repayments until all your debts have been completely repaid. Afterwards, take the necessary steps to rebuild all the negative impact that past debts may have caused on your credit history.
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About the Author
Sandra Thompson is a writer and consultant with Consolidate4Free.com and has been providing consumers and business owners with free Debt Consolidation Advice since 1990. For years she has helped people with loan and credit problems especially pertaining to Personal Debt Consolidation, Credit Card Debt Consolidation and Debt Negotiation. Copyright 2008.
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