What Can I Do If I Have a Defaulted Business Loan?
A defaulted business loan can lead to financial strain. Whether it is business loan, merchant cash advance or Small Business Administration loan, it can have negative impact on your FICO score, as well as increase the interest rate on the said loan. In the worst case scenario, a creditor may try to recover the sum lent by foreclosing on your property, as well as seizing bank accounts or other assets by issuing a lawsuit against you.
However, when it comes to defaults, it does not necessarily mean that that’s the end of your business. You may want to ask your creditor for a new payment plan that may suit you. Alternatively, you may appoint a business debt lawyer to ensure that your assets are not seized and get the loan status back to clear.
Below the attorneys at ZocLaw.com explore the steps that you may consider and follow after defaulting on a business loan
Are You Considering A Loan Repayment Plan?
As a business owner, for the best interest of both your business and yourself, do not to apply for a business loan unless you are quite certain that you will be able to make timeous payments to the creditor to clear the loan. Everyone understands that emergencies may crop up at anytime, revenue may drop depending on the market fluctuation or some global cues, and as you are aware, default rate always follows the economic trend. Furthermore, unpredictable expenses may often take priority for paying off loans, for example a car breakdown. You should try to identify the reason why you failed to repay a loan payment. Once you have identified the cause or defaulting, it will be easier for you to take some important steps to rectify it.
- If the reason for your default is an emergency, and it didn’t leave a negative impact on your business from a long-term perspective, you must create an emergency fund to make monthly loan payments.
- If you believe that your business may not continue with the present loan repayment plan in the future, consider your personal finances to determine what amount you can afford.
Can I Negotiate With My Creditors?
Yes! Don’t give up. A defaulted business loan is not the end of the world and it surely doesn’t necessarily mean that your business has failed. You may negotiate with your lender.
Debt negotiation The bottom line is that lenders do not want any of their customers to default on any of their loan accounts as it would ultimately hurt their company. Thus, you have to be firm in communicating with your creditor and request that they change your payment plan. Here are some effective options available to you:
- If you will find it difficult to manage longer payments, but currently have access to quick cash, you may want to consider business debt settlement. In terms of a loan settlement, you will need to pay your creditor a lump sum that is somewhere between 20-70 % less than the actual amount payable. The creditor will close the loan account once the loan is settled. However, note that a settlement may have a negative impact on your credit profile.
- If you believe that you will be able to pay a reduced amount of money per month, you may ask your bank to decrease the amount of each monthly installment and also to extend the period of payment. Consequently, would put less pressure on your monthly finances. However, with such a payment, the creditor may increase the interest on the loan.
As our experts clearly pointed out, a defaulted business loan does not mean that you have to close down your business. Speak to one of our experts to discuss the best way to handle a defaulted business loan.