Business debt repayment tips: Find out your debt relief path
Author Bio : Dan Marshall is a financial writer and enjoys writing articles on the global financial situation, bankruptcy, making money online, the stock market, debt consolidation, and mortgages along with other finance-related topics. He is associated with Oak View Law Group.
Entrepreneurs must understand that they need to have the requisite skills to manage their business as well the financial resources in order to thrive in this highly competitive but shrinking economy. However, a good number of entrepreneurs are facing enormous difficulties in running their business efficiently because of reduced revenue and high operational costs. As a result, they are saddled in huge business debt.
Hence, entrepreneurs who are looking for ways to straighten their company’s finances must opt for the various debt relief options that can bail them out from the current crisis.
Reasons to choose debt relief programs
Here are reasons that should make the entrepreneurs opt for debt relief options:
® The profit margin has reduced considerably for the past several months.
® There are atleast 3-4 monthly outstanding payment deadlines to meet that have practically become impossible for them to manage.
® Debt collectors have started making collections calls besides sending them letters asking to make the payments.
® There are different types of loans with varying degrees of interest rates. Moreover, these loans have different loan terms and conditions.
Once, entrepreneurs have figured out their financial shortcomings, then they can approach the debt relief companies for professional help accordingly. In this case, one of the most preferred modes of debt relief is ‘debt management plan’ or DMP. Here is a short description about its process.
How debt management plans work
Debt management plans work in the following ways:
i. Entrepreneurs who opt for the DMP are required to work with a credit counsellor who will guide them through the debt relief program.
ii. Credit counsellors will conduct a personal financial management session with the debtors. During this session they’ll gather all their financial information and decide on a budget as well as debt repayment plan. This plan are devised on the basis of the total loan amount and the maximum monthly payment amount that could be easily afforded by the debtors.
iii. After making a budget and a repayment plan, credit counsellors will start negotiating with the creditors on the debtor’s behalf, conveying them about their client’s financial hardship. At this stage, credit counsellors act as the communicator between the debtors and creditors.
iv. The success of the DMP is based on the consent of the creditors. In this case, debtors may get the advantage of reduced interest rates or waived off penalty charges. The repayment plan should be made following a written agreement between the creditors and debtors. As a result, of this agreement, both the creditors and the debtors will be liable for prosecution in case of breach of contract by anyone of them.
v. Ideally, DMPs should not take more than 60 months to complete.
Lastly, with each passing day, it is become all the more difficult to run a business. This is because of global economic crisis and reduced consumer spending. So, in such a situation entrepreneurs should try to cut down on unnecessary expenses and stop using multiple credit cards. This will help them to stay away from debt and keep their businesses financially stable.
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