With fewer job opportunities and available ways of coming up with new businesses, most people are now engaging in entrepreneurship. It takes courage, commitment, and skills to make a business succeed. One way to make a business thrive is to get loans from credit cards or other financial institutions to expand and run your business. The primary issue comes when you are supposed to pay the loan. Many entrepreneurs fail or find it hard to deal or pay such debts, especially when their businesses aren’t flourishing. If struggling on the same, there are several ways you can use to settle your debt, which we will discuss in this article. Continue reading to find out more.
Some Facts on Business Debts
Having debt isn’t a bad thing unless it damages your reputation and gets out of control. Most businesses thrive on loans since when established, and they still borrow when expanding, buying equipment and inventory, and other necessary needs. Here are some facts:
- Most businesses use financing: Only a few businesses are managed through savings. At least 70% of currently operating companies expand, cover operating costs and refinance themselves through loans.
- Most Businesses use Unsecured Loans: Most entrepreneurs go for unsecured loans to fund their businesses. This process saves its properties and assets, and most entrepreneurs do this to let the business pay for its loans.
- Pros and Cons of Using Credit Cards to Finance Businesses: Credit cards are mostly used to finance ventures because they take less time to process, and it’s easy to receive the loan, while some have limited restrictions. The only disadvantage is that their interest is higher than other financing means.
- Business debt in the United States: It’s common to find a business having many obligations in the United States. Business loans are among the highest loans in the country.
How Can Businesses Handle Credit Card Debts?
It is prevalent for businesses, whether small or large, to have credit card loans. How you handle them matters a lot. There are several ways of handling these loans, including the below:
- Access your debt: Accessing your debt helps you know where there is trouble and fix it before things worsen. If incurring more debt than income, it’s high time you evaluate your expenses and minimize them, including the taxes. Also, try to increase your revenue from generating venues without increasing costs.
- Change Business spending Habits: After knowing where there is an excessive expenditure, try minimizing or curbing it ultimately. You can do so by reducing the addition of assets, reducing the number of employees, reduce your business bills, and get cheaper suppliers, and so on.
- Increase your sales and Revenue: You can promote your business to increase your income and balance your debt-to-income ratio. The promotions include: exposing your business more, raising prices, improve your sales targets, and focus more on your clients.
- Consider Debt Settlement: Most businesses take debt settlement as an option to reduce their loans and survive in the business world without filing for bankruptcy. You can arrange a debt settlement on your own or hire a debt settlement company, as discussed below in depth.
What is Debt Settlement?
Debt settlement refers to the process of hiring a company or doing it yourself to discuss with your creditors to pay a debt less of what you owe. Most banks and other financial institutions accept less payment than what you owe them as long as you explain yourself and negotiate.
To avoid a tedious negotiation process, most business people hire debt settlement companies to carry on the process at a fee. These professional companies have professionals conversant with the field and can help your business pay less of its debt and avoid filing for bankruptcy. With a debt collection company, you reduce the overall debts, pay fewer premiums, and become debt-free earlier than when paying the full premiums.
How Does Debt Settlement Process Work?
You can do the debt settlement process on your own or hire a debt settlement company you can consult online. If you decide to use the company, you contact them to explain how their program works and the step involved. Here is part of the settlement program:
- Building an account: You are required to make some deposits in FDIC-insured savings account under you.
- Negotiation: After making some deposits, the debt settlement company carries out the negotiation process with your debtors in solving the debt
- Settling the Debt: Each time an agreement is reached, the settlement company contacts you to pay the debt. You then gain freedom after all settlements have been made.
The debt settlement company only gets their commission after agreeing with your creditor to lower the debt, depending on the agreement.
Who Qualifies for Debt Settlement?
Not every business or loan qualifies for a debt settlement process. Secured debts, including mortgages, secured bank loans and company car loans, do not fall under this settlement. Others on this list include federal student loans and tax debts. To know if your business debt qualifies, you can ask for a debt evaluation, usually done by the debt settlement company. Here are some of the qualifications:
- If having over $7500 and above in unsecured debt comprising credit cards or other non-collateral debts
- If you are the owner of a sole proprietor business that bears all the debt
- If you got into debt through financial hardships. These hardships include business insolvency, job loss, or getting a loan to keep your business afloat
- If struggling to pay a debt and you are behind the commitments
Having uncontrolled business loans may hinder your journey into entrepreneurship. It can make you never enjoy any profits or make your business shut down. The best way is to manage the loans since they are unavoidable and try to settle them once overdue. Getting a debt settlement company is one of the best ways to manage accrued loans and help save your business.