You never expected to reach this point, but here you are… Maybe business was slow last month. Or one of your top employees was injured and unable to work, putting you behind schedule and strapping you with expensive workman’s comp bills. Maybe you just didn’t plan appropriately and mismanaged funds. Whatever the reason, you won’t be able to make your loan payments. What should you do? Partnering with a lending company can be a beautiful thing. It can lead to better opportunities and increased revenue. But, sometimes, a business loan can prove to be more of a burden on a company than a blessing. If your business is struggling to make payments on its business loans, you have a few options, which we’ll discuss in this post.
1. Call Your Lender
This is your best option. Remember, the lending company you’ve partnered with is made up of people just like you. Talk with them, discuss your situation. They will listen if you attempt to communicate with them honestly. Nothing is guaranteed in the business world and the unexpected often happens. Lenders understand this. They’ll likely be able to push back your payment date if you have a good reason for the delay and approach them about it. It’s important to understand that your lender wants you to pay back your loan. It’s in their best interest. And most lenders will do their best to accommodate a struggling business if they can. So step one is calling your lender and notify them of your current repayment struggles.
2. Consolidate Your Debt
Debt consolidation is a form of refinancing that sees a debtor taking out a new loan to pay off all of their other ones. It will allow your business to make one monthly payment instead of many, often at a lower interest rate than before. While consolidating debt can help a business crawl out from beneath company crippling monthly payments and free up capital for necessary day to day spending, there are a couple downsides you need to be aware of. Though your monthly payment will be lower, you’ll end up paying more money in the end and for a longer period of time. That’s because the company that has agreed to refinance your loan still requires you to pay back the full amount. They’re just allowing you to do so at a lower interest rate and over a longer period of time. But, for many businesses, this is a far superior option than continuing to deal with the constant stress of missing payroll due to high loan payments, tanking their company’s credit score, or even losing the business altogether.
3. Consider Reverse Consolidation
Let’s talk about an all too common scenario: a small business owner needs money. Maybe it’s because an opportunity to grow his company has presented itself and he wants to take advantage of it. Perhaps he needs extra funds to pay bills. The small business owner doesn’t have the best credit and no lending company will offer him a loan. So he applies for a cash advance to get the capital he needs. Unfortunately, the one cash advance isn’t enough and the business owner soon finds himself applying for another. And then another to help pay for the previous ones. This is a dangerous cycle that often leads to bankruptcy. But there’s another way! Companies like Cast Capital have begun offering what’s known as a reverse consolidation. We provide business owners with enough weekly funds to satisfy their current cash advance positions, and in return, a small daily payment is credited to us, extending the term and freeing up cash flow. Businesses save an average of 30 – 40% of their daily cash flow and are able to get out from under oppressive cash advance positions with this program.
4. Restructure Your Debt
Restructuring your debt is another option available to you. But, aside from defaulting on your loan, debt restructuring is the worst possible option you could choose! It may seem like an innocent proposition. You may even think it’s the same thing as debt consolidation. But the truth is, it’s the single most predatory program to ever enter the online lending space. No joke. Here’s what really happens behind the scenes of a restructured debt deal: A debt restructuring company will pose as a lender. Any company that poses as something else is almost always shady, just FYI. They will then offer you an incredible deal — lending terms that are simply too good to be true. Once you accept the terms, they’ll purposely make you break the terms of your original loan, putting you into default. Next, they’ll negotiate with your previous lender on “your behalf” for a sum that you’ll be able to repay. All while earning a commission for facilitating the deal. Your company will then be blacklisted and never be able to borrow money again. Shady business, right? When those debt restructuring companies come a knockin’, we suggest you run the other way. Fast!
5. Borrow From a Friend
If you can’t make your loan payments, you can always try tapping your network. Do any of your good friends have some money stashed away? What about your parents? Now, none of us want to hit up our loved ones for cash. But it may be your best option. And as a business owner, you sometimes have to swallow your pride and do the hard thing. It’s better than defaulting on your loan or getting into bed with those shady debt restructuring scams, right? If you do decide to borrow money from someone in your network, friend or family, just make sure you do it the right way. First, always be professional. Ensure them that you’re good for it, they will get their money back. You can even sign a contract if it makes you feel better. Also, to the best of your ability, give them a timetable for when you’ll be able to reimburse them. Finally, only ask for the bare minimum. You’re not trying to expand your business here. You’re simply hoping to get out of hot water
6. Default On Your Loan
This option has only been included by default — pun intended. It’s what happens when you either refuse or fail to pay back your business loans. If there’s a way to avoid defaulting, take it! Not only will it destroy your credit, it will also stain your business. Your company will be blacklisted and you’ll never be able to borrow money again. That may not seem like the worst thing in the world right now, since you’re neck deep in bills you can’t pay. But in the future, when your finances have recovered and you’re looking to expand your company, not being able to secure funding will definitely hurt. On a side note, that’s why it’s so important to consider the true cost of any debt your company takes on. Obviously, the unexpected happens. But by understanding what exactly it is you’re doing before you accept capital from a lender, you’ll be able to better protect your company from financial hardship.
Wrapping Up
The struggle to make loan payments is something I hope your company never has to deal with. It isn’t fun. But if you do find yourself in a financially difficult situation, and simply don’t have the capital to pay off your debt, consider using the options listed in this post. As always, our financial experts are ready and waiting to answer all of your questions. Need a loan? Want to repair your credit? Simply looking for financial advice? Contact us today.