Negotiation Debt Management Advice for Businesses
Business debt can be a burden. Get advice on how to negotiate with your creditors and find both solutions and strategies to solve your problem, using negotiation.
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Being in debt can feel like trudging through a mud drenched field after a heavy rain. Thinking about your debt can haunt you, whirling around in your brain during the early morning hours, while you restlessly toss and turn. You’ve done everything right but many outside factors are simply out of your control, these can include:
- An important client cancels your biggest contract
- Creditors demand faster repayments
- Your bank won’t roll or renew your loan
- Your staff threaten to strike or hand in their notice
- The weather, shortages, civil strife and a whole host other goblins can leap out of the dark shadows any time, causing your bottom line to suddenly flash bright red
You might have initiated marketing strategies that stalled at the starting gate or face cost overruns that are now strangling your cash flow. Don’t fret. This can happen to successful businesses – you’re not alone. Let’s take a look at some positive business strategies to help dig your way out of the debt pit.
Business Debt Negotiations
A business debt negotiation begins when you reach out to your creditors and endeavour to restructure debts into more manageable instalments. Creditors are amenable to this approach because they want to be re-paid. They realise that cash flow problems are not uncommon in business, so your creditors will work with you to help you stay afloat. Now, if you possess the skills and expertise to negotiate your debt management, then do so. If you do not possess negotiation skills or do not have the time to invest in negotiating your debt, then you might want to be represented by a third party specialising in business debt management, such as a debt consolidation company. These representatives are trained financial negotiators.The most important point to remember when the looming spectre of insolvency is threatening your company is not to delay or put it off. When facing the hovering storm cloud of debt, procrastination is your greatest enemy. There’s no substitute for improving your negotiation skills from taking a negotiation training course.
Beware of Declaring Bankruptcy
We read about companies declaring bankruptcy all the time. Although it may appear a tempting solution to get out from under your debt, bankruptcy will not be productive for you long-term. You may possibly have to close up shop, hanging up the dreaded ‘out of business’ sign. The bankruptcy process can be very time-consuming and more costly than you might imagine, especially if creditors initiate a civil lawsuit against your company. It takes years to clear your bankruptcy from the credit bureaus. Many years might drag on before a creditor will even consider giving you a personal or business loan without a derisive snort. First consider the following proactive steps:
Proactive Steps to Mitigate Your Business Debt
This is something you can plan for, on your own initiative. There are many means for reducing your outgoing cash flow. Think about your operation costs in both the short-term and the long-term. This might mean reducing your labour costs through either short-term or permanent lay-offs. You could also look at reducing your production costs by streamlining the products you manufacture or by using less expensive suppliers. By cutting away and trimming the dead wood and other low productivity factors, and by lowering your overall costs and expenses, you can immediately begin alleviating your financial stress. This approach can deliver short term pain, but is better for the longer-term impact of your future business options.
Other Proactive Strategies
As a manager, you can also implement other proactive strategies to face your business debt head-on, such as:
- Selling off dispensable business assets, such as machinery, to raise additional capital. You can likely lease back your assets with the proceeds from the sale.
- Increasing your sales volume.
- Increasing your prices.
- Seeking out additional sources of income (For example, this might consist of leasing out unused warehouse space, office space, or equipment.)
Business Credit Counsellors / Business Debt Management Specialists
As your plan evolves, you might consider obtaining professional advice. When negotiating with your creditors to restructure your debt, keep in mind there are several financial business management strategies open to you.
Negotiate your Business Debt through Restructuring
Before knocking on your creditors’ doors, you must assemble a feasibility plan showing your intent to reduce your business overhead. Your plan should explain how you intend to carry out future business and could entail outlined business strategies for:
- Sales and marketing
- Overall operations
- Management and staffing
- Future business (addressing the particular business climate that affects your operation)
- Current assets versus possible future assets. (e.g. sell off assets to raise cash)
After developing your plan, you should draw up a proposal detailing how you would like your debt to be restructured, using the cost reduction or other plans as support. This can show your creditors how your business can produce sufficient cash flow to operate profitably, and continue to pay the debt that is owed, by addressing:
- How the business can service the debt instalments
- Your minimisation of future debt
- Existing revenues and future prospects in the pipeline
- A breakdown of your creditors
- What action is being taken to mitigate losses
These are crucial steps toward successful negotiation with not only your secured creditors, but also with your suppliers or your unsecured debt.
Strategies to Address Business Debt
Most business debt falls into one of two categories. The first is secured debt, which normally occurs with a lending institution and may either be secured through collateral, such as property, or through a promissory note where the borrower assures the repayment of the debt. The second is unsecured debt, which is any loan arrangement where there is no collateral involved, such as credit cards or arrangements you’ve previously hammered out with your suppliers. You can negotiate reducing costs by implementing and negotiating one or several of the following strategies in either situation by:
- Arranging for lower interest rate loans.
- Obtaining secured loans to replace unsecured loans, which can help reduce your interest rate.
- Guaranteed loans (through shareholders) that also will lower the interest rate.
- Issuing preferred shares, and paying off your loans with the proceeds.
- A longer repayment plan.
- Consolidating loans, encompassing several loans, to reduce monthly payment.
Consider discussing specific scheduled payment terms or negotiate longer terms with your suppliers. These vendors want their money and may be open to your request, saving both lost time and expensive litigation costs.
There are many alternative business and negotiation strategies that can be employed to triumph over the burden of debt. The one vital thing you should always remember is not to be an ostrich; don’t stick your head in the sand hoping your debt will have magically disappeared when you finally come up for air. Be proactive as soon as possible to save yourself from many unnecessary sleepless nights.