12 Mistakes to AvoidHow to Negotiate Business Debts
12 Mistakes to Avoid: How to Negotiate Business DebtsWhen business owners are faced with a financial crunchmany have no clue how to negotiate business debts whencreditors start calling and demanding payment.These 12 simple steps will help business owners negotiatewith their creditors effectively and minimize disruptions totheir business operations.
12 Mistakes to Avoid: How to Negotiate Business Debts Business Debt Mistake# 1: Alienating Your CreditorsWhen a creditor calls you on the phone, one of the worst things you can do is avoid their calls. It’s a normal reaction because you do not want to tell them that you do not have the funds to pay them. However, whats worse than telling them you cannot pay is leaving them in the dark by ignoring their calls and letters.Creditors understand that clients will fall behind in their payments in the course of doing business. If you do not have the funds, it is best to tell this upfront. By doing this, it can open up opportunities to create other ways to paying back the debt such a setting up a payment plan or negotiating a lower debt settlement.One thing to remember though, never make promises that you know you cannot keep. Do not accept a payment plan that you know you will not be able to sustain. If there is no solution that can be agreed to it is best to leave it at that and come back another time to resolve the matter.
12 Mistakes to Avoid: How to Negotiate Business DebtsBusiness Debt Mistake# 2: Thinking You Can Save Your Credit ScoreUnfortunately, when your business is struggling financially and behind on its debts and when some of these debts are tied to your personal credit, trying to save you credit score is usually wasted effort.Your number one goal should always be to save your business; to fix whatever problems your business has, not to save your credit.One of the tricks creditors do is try to entice you to pay and in return will not report you to the credit bureaus in an effort to save your credit score. It may be tempting but could be very detrimental to your business especially if that cash is badly needed to keep your business operating.
12 Mistakes to Avoid: How to Negotiate Business DebtsBusiness Debt Mistake# 3: Not Knowing the Full Extent of Your ExposureAsk yourself these questions:1. Are you or anyone involved in the business personally liable?2. Are the debts secured by any assets and can it be repossessed?3. Can your business operate without certain creditors? Which creditors are vital to the survival of your business?4. Can you afford to defend a lawsuit?5. Can they freeze your bank account?6. Can they put you in bankruptcy?Knowing the answers to these questions will help you to determine exactly where you stand when youre negotiating your debts with your creditors. It will also help you prioritize which creditors are the most important, in terms of requiring your utmost attention.
12 Mistakes to Avoid: How to Negotiate Business Debts Business Debt Mistake# 4: Not Putting Together a Debt Explanation FileThis debt explanation file is for your creditors benefit. This file will contain the following:1. Hardship letter – This letter is to explain to your creditors the reasons why you are unable to make payments.2. Company Financial StatementWhen requested, you send this file to your creditors. At times, when your creditors are made aware of what’s going on with your business they are more likely to work with you rather than harass you.
12 Mistakes to Avoid: How to Negotiate Business Debts Business Debt Mistake# 5: Overestimating Your Debt Negotiation Skills & KnowledgeMany business owners think that they are up to the task when it comes time to negotiate their debts with creditors. And creditors hope that this will be the case.Creditors always employ the use of professionals such as attorneys and debt collection agencies. These are people trained in negotiation tactics and they count on business owners believing they can handle it themselves.You need to be honest with yourself to know if you truly can handle negotiating with these professionals or not. If you cannot, then you need to consider having professionals to represent you in the matter.
12 Mistakes to Avoid: How to Negotiate Business Debts Business Debt Mistake# 6: Not Being Physically & Emotionally Ready to NegotiateWhen your creditor begins a full collection assault against you, expect relentless collection calls from the creditor or their agents.You see unlike with personal debts where collection agents have to abide by the FDCPA (Fair Debt Collection Practices Act) rules, with commercial debt none exists. This means they can call anytime they want day and night and can be as harassing as they want to be.Here is an excerpt about why the FDCPA does not cover business debts:"Congress believed and continues to believe that those who owe business or commercial debts are sophisticated enough to withstand or at least not be as threatened when faced with business debt collection abuse or harassment. Thus, the FDCPA does not protect a person who is alleged to owe a business or commercial debt. A business who believes it is being abused or harassed in the collection of business debt should consult creditors’ rights or debtors’ rights corporate attorney."If youre not able to handle the barrage of calls from them, physically or mentally it’s best not to take them on. Youre not alienating them; if youve already spoken to them at least a few times a week and there is no change in your business finances, then their continuous calls is merely to harass you into paying.
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