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Looking for business debt relief services? Visit Delancey Street.

Dealing with business debt can be overwhelming. Unpaid bills pile up, creditors call nonstop, and you feel like you’re drowning with no relief in sight. But there are solutions available to find your way out of debt, restore your financial health, and save your business. Business debt settlement is one potential path forward when facing unmanageable business debts.

What is Business Debt Settlement?

Business debt settlement, also called business debt negotiation or settlement, is the process of negotiating with creditors to pay off debts for less than what is actually owed. It involves working with a settlement company to act on the business’s behalf to negotiate deals with creditors.The goal is to settle accounts for a fraction of the outstanding balance – often between 40-60%. This allows the business to resolve what they owe at a discounted amount they can realistically afford to pay. It helps them avoid bankruptcy or other more drastic measures.

When Should a Business Consider Debt Settlement?

There are a few key times when business debt settlement starts to make the most sense:

  • The business has several delinquent accounts or debts in collections status. Settling could help resolve these at a discount and avoid further damage.
  • The business is facing cash flow issues and struggles to keep up with monthly payments. Settlements provide payment relief.
  • The owners want to sell or exit the business but need to clean up the company’s financials first.
  • Bankruptcy is on the table but not the preferred option. Settlement provides an alternative.

Essentially – when the business realizes they cannot feasibly pay back what they owe in full, that is when settlement deserves strong consideration.

The Benefits of Business Debt Settlement

There are many potential upsides for a business that engages in the debt settlement process:

  • Pay off debt for less than you owe – The biggest benefit is resolving account balances at a significant discount, often 40 to 60% less than what was originally owed. This makes payments more affordable.
  • Avoid bankruptcy – For many businesses bankruptcy is completely off the table. Settlements let you negotiate with creditors outside of court and avoid damaging bankruptcy filings.
  • Stop collections calls and lawsuits – Once in the program, collections calls and legal actions from creditors are put on hold. This provides immediate relief and time to negotiate settlements.
  • Consolidate multiple debts – By working with one settlement company, you can negotiate multiple debts at once and consolidate into a single monthly payment.
  • Improve cash flow – Since settlements are paid off in installments or lump sums less than full-balances, businesses save money each month.
  • Tax benefits – In some cases, businesses can deduct a portion of the reduced debt from their taxable income.
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Settlement provides a lifeline to resolve unmanageable debt and make it more affordable. This gives businesses room to recover and improve their financial outlook.

What Debts Can Be Settled?

Many types of business debt can be negotiated for settlement, including:

  • Business Credit Cards – This may include both company cards and cards owners used for business expenses.
  • Business Loans & Lines of Credit – Term loans, SBA loans, HELOCs, and almost any type of installment loan.
  • Accounts Receivable Financing – Factoring companies and merchant cash advance debts.
  • Commercial Leases – Remaining balances for equipment, vehicle, storage units, etc.
  • Business Services – Debts owed to vendors critical to operations.
  • Taxes – Payroll, sales tax, and almost any business tax debt.

If it is owed by the business, carries an outstanding balance, and is with a creditor willing to negotiate – chances are it can be settled.

How Does Business Debt Settlement Work?

The settlement process involves several key steps once initiating services with a settlement company:

  1. Debt Analysis – Collect documentation for all business debts to understand total balances owed. The settlement company reviews to identify accounts for the program.
  2. Account Validation – Contact creditors to verify ownership of the debt and settlement options. Collection agencies may require debt validation before proceeding.
  3. Propose & Negotiate Discounts – Settlement specialists negotiate directly with creditors to secure discount offers of 40% to 60% off total owed. Multiple rounds of proposals may be required.
  4. Finalize Agreements – Creditors issue settlement letters outlining agreed terms. This serves as legal confirmation of reduced payoff amount.
  5. Establish Payment Schedule – Based on company finances, setup affordable payment plans to pay settlements in installments or lump sum.
  6. Process Settlements – As payments are made to the settlement account, funds are disbursed to creditors to satisfy reduced balances.
  7. Account Closure – Once settlements are paid in full, creditors mark accounts as closed/paid status. The debts are resolved on credit reports.

It provides a structured path to tackle multiple debts at once and permanently resolve account balances through settlements.

What Does It Cost?

Legitimate settlement companies work on a contingency fee basis – meaning there are no upfront fees charged to the business. Instead, the settlement company earns a percentage of the total savings generated from settlements. This fee is only paid out of the debt relief achieved on each account.If no savings are negotiated, there are no fees owed. The business only pays a fee if the settlements actually save them money.

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Choosing a Settlement Company

With the rise in popularity of debt settlement, many companies now offer similar services. But not all will provide the same level of experience and effectiveness.When researching settlement firms, look for the following:✔️Industry Experience – Established history with business debt settlement specifically. This matters more than consumer debt experience.✔️Individual Specialists – Assigns a dedicated specialist to personally manage your case, not a random representative each time.✔️Custom Strategies – Tailors proposals and negotiations based on each creditor’s policies and the business’ unique situation.✔️Ethical Practices – Upfront about process and fees. Does not overpromise savings. Trustworthy and responsive.✔️Results & Reviews – Proven experience delivering results for business clients, validated through online reviews.A settlement company that checks these boxes gives you the greatest chance at securing optimal settlements and a positive experience overall.

Can Settlement Hurt Your Business Credit?

A common concern with debt settlement is the potential damage to your business credit scores and reports. When weighing the pros and cons, it helps to understand the likely credit impacts.The effect on business credit depends largely on the settlement outcomes:

  • Settled in Full – If accounts reach negotiated settlements that are paid in full, some creditors will update status to reflect this. This is the most favorable outcome.
  • Settled for Less – Most creditors report unpaid balances as “settled for less than full amount.” This signals accounts were not satisfied as originally agreed.
  • Charge-offs – If balances are not settled, accounts may charge-off. This indicates the creditor has “written off” the debt with little chance of payment.

While business credit scores see minor dips for settlements, the damage is still far less severe than bankruptcy. Even with settlements, most businesses remain creditworthy for financing in the future.

What Debts Should You Prioritize Settling?

With limited resources to put towards settlements, focusing on certain debts first is key:👉Business Taxes – Getting current on payroll taxes, sales tax, etc improves compliance.👉Accounts Receivable Debts – Resolve factoring/merchant cash owed to regain control over incoming receivables.👉Critical Business Services – Settle debts with essential vendors to avoid supply/service disruptions.👉Recent Delinquencies – Clear up recently defaulted cards/loans before they get sent to collections.Settling these priority categories first helps stabilize business operations. It reduces risk of tax penalties, lawsuits, or other immediate threats resulting from the debts.

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Alternative Ways to Deal With Business Debt

If debt settlement does not seem like the right solution, a few other options exist:Debt Consolidation – Combines multiple debts into a single new loan with lower monthly payment. This keeps accounts current but repayment period is often extended.Debt Management Plans – Works with creditors to negotiate lower interest rates, waive fees, etc to reduce monthly payments and pay off balances in full over time.Chapter 11 Bankruptcy – Court-supervised process for restructuring/reducing business debts and developing repayment plan. More complex and expensive than settlement.The right approach depends on each business’ unique situation. Speaking with a financial specialist helps weigh the pros and cons of each method.

Business Debt Settlement FAQs

How much can my business realistically save through settlement?Most creditors require at least $10,000 in total debt to consider settlement deals. On qualifying accounts, businesses save between 40 to 60% off their balances through settlements.How long before I see results?The process takes between 4-12 months from start to finish. It depends on number of accounts, creditor response times, and overall business finances. Most see initial proposals within the first 2 months.Can I settle business tax debt?Yes, through an Offer in Compromise program, the IRS and state taxing authorities allow certain taxpayers to pay off tax debts for less based on inability to pay in full. Settlement companies can negotiate these discounts.What debts should not be settled?If you wish to continue an ongoing relationship with a vendor or supplier, settlement may not be advisable. Also avoid settling secured debts like commercial mortgages or equipment leases you wish to keep.Are debt settlements binding agreements?Yes, once a creditor provides a settlement letter confirming the reduced payoff amount, this legally binds them to close the account once that amount is paid per the terms.

Ready to Explore Business Debt Settlement?

If business debts have become an unmanageable burden, know that settlement provides a legit way out. It delivers results through discounted payoffs, payment relief, and a chance to move forward. And it beats the alternatives of bankruptcy or continued collections harassment.Here at Delancey Street, our team has negotiated over $250 million in business debt relief for companies across the country. Set up a free consultation today to discuss your unique situation and debt settlement options. Our dedicated specialists will review your finances, calculate potential savings, and customize a game plan to negotiate your debt down for good.

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