How To Restructure Your Debt to Stay Afloat

Barbara Weltman Just about every business faces difficult periods at some time. Despite the best of business plans, tough times can result from things beyond your control, such as weather-related catastrophes, problems with suppliers or other unexpected events. Whatever the cause of the difficulties, it is up to you to pay your creditors or go out of business.

Recognize the problem
If you face a growing inability to pay your bills when they come due, you may have serious cash flow problems. These can be the result of:

  • Lack of sales – not bringing in the dollars you need to cover your expenses.

  • Slow or uncollectible receivables – you’ve made sales, but aren’t receiving payment on a timely basis.

  • Undercapitalization – you are carrying more debt than you can afford.

    If you become like some of your customers and are behind in paying your bills, you have a problem. It won’t help to duck the issue and hope for a better tomorrow. You must take action to avoid further problems.

    Consider the alternatives
    You can try to restructure your debts by yourself by approaching your creditors. Some will oblige, giving you more time to repay or easing the credit terms. But you may find some creditors who are not willing to work with you – because they don’t trust you or for another reason.

    You can go out of business. However, you may have personally guaranteed some debts of the business. Even though the business closes, you remain obligated to make good on your guarantee.

    You can use a debt restructuring service to create a plan to get out of debt. Typically, these services will work with small businesses that have debts of at least $15,000, a minimum of four creditors and can afford to make monthly payments of at least $1,000. Creditors may be willing to work with a bonded intermediary – a commercial debt restructuring firm – where they might not have been amenable to your direct proposals.

    Individual versus business debt
    Individuals who face mounting personal debt can turn to any number of credit counseling services. These services, many of which are nonprofit agencies, create repayment plans and work with creditors to arrange terms that individuals can handle. Companies do not have the same range of options –there are no nonprofit agencies that help small businesses get out of debt.

    However, Commercial Credit Counseling Services, Inc. of Paramus, NJ ( may provide a solution for troubled small businesses. As the nation’s leading debt restructuring firm, they can develop a plan that “debtors can afford and creditors will accept.” The company’s fees for its plan are built into the payments, so that debtors do not pay any more than they would have if they’d made full payment on their outstanding debts.

    Benefits to the debtor.A repayment plan allows a company to avoid a liquidation and stay in business. Other benefits:

  • Using a debt restructuring firm lifts the burden from the business owner of having to deal with creditors, collection agencies and creditors’ attorneys. This leaves more time for the business owner to devote to running the business.

  • A repayment plan avoids levy on a debtor’s bank account, a move than can undermine the business’s existence.

  • Sticking to a repayment schedule can have a positive effect on your company’s credit rating, even though you are in the midst of a repayment plan.

    How it works.In order to develop a repayment plan, a small business must share information on its payables. The amount is then verified by the creditors. The company then creates a plan, based on the debtor’s budget and the creditor’s cooperation.

    You can select the creditors with whom you wish to enter into a repayment plan, leaving your critical suppliers out of the loop (provided that you can pay them in full when due without including them in the repayment plan).

    Other resources
    There are other commercial debt restructuring companies that you can find on the Web. It is always a good idea to check with your local Better Business Bureau before doing business with any firm.

    For farmers and ranchers, the U.S. Department of Agriculture’s Farm Service Agency provides credit counseling and advice ( and search “credit counseling” for access to local offices of the Agency).

    Copyright © 2005 by, Inc.

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