While many people will say the small businesses are keeping the “American Dream” alive, they are more than often the most susceptible to falling into debt and closing their doors for good. With so much competition from big-name stores and brands, it has become increasingly difficult for small businesses to stay afloat. Especially today, with so many people stuck in quarantine and unable to support their local vendors, more and more small businesses are falling into debt.
Luckily, there are options for businesses, so they don’t have to close up shop for good. Instead of filing for bankruptcy and letting their dreams go along with it, debt restructuring is a viable option for businesses.
Less Debt With More Affordable Payments
One of the greatest benefits to a business restructuring its debt is the reduction of the debt payments themself. When a business opts for debt restructuring, the process can reduce debt repayments easier to manage and more affordable. In all honesty, creditors want to avoid bankruptcy just as much as business owners. This is the reason creditors will be much more willing to change their debt terms and avoid bankruptcy altogether.
Once a business is going through the debt restructuring process, interest rates on loans, on average, will be reduced and they will have the chance to renegotiate the terms. During this process, debt payments are typically lowered by 40% to 60%. This reduction can improve the business’s cash flow immeasurably.
No Filing for Bankruptcy
As mentioned before, no one––not even the creditors––wants a business to file for bankruptcy. To be frank, bankruptcy is the final nail in the coffin if a business is too overwhelmed with debt and unable to make any more payments. Bankruptcy is incredibly expensive for all parties involved and will label the business owner with the worst possible credit rating.
To avoid bankruptcy, one of the best options for a business is to restructure its debt to keep the business alive and operating.
More Balanced Cash Flow & No Affect on Credit Profile
Obviously, there is going to be a stagnation in cash flow when a business is in debt, and impossible to make an actual profit. However, when a business chooses to restructure its debt, there is potential access to more liquidity. Liquidity access can be used to stabilize the business. If refinancing the high-cost loan product is not a viable option, then by using a debt restructuring strategy instead, the business can immediately have better cash flow. Whatsmore, debt restructuring will give your business a more balanced and better-managed cash flow with no new loans. No new loans also means no reporting to the credit bureaus, too.