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Debt settlement strategies you can explore

On Behalf of | Oct 30, 2024 | Settlement Negotiations

As a small business owner, you took out a Merchant Cash Advance (MCA) to buy new equipment when business was good. However, when sales dropped, the daily MCA repayments became too much. You also found a UCC lien against your business, limiting your ability to get more financing. You now face high debt and few options.

Many business owners struggle with this situation. Managing debt, especially MCAs and UCC liens, is hard. However, you can use strategies to control your finances and stabilize your business. Here are some steps to manage your debt:

  • Assess your finances: List all debts, including amounts owed, interest rates and payment schedules. This will help you determine how much you can offer to settle.
  • Save for a lump sum: Creditors often prefer lump-sum payments. Save as much as you can to make a big offer. This shows you are serious about settling.
  • Contact creditors: Contact your creditors. Explain your situation and ask to settle the debt. Be honest about why you cannot pay the total amount. Ask to speak with a manager for better results.
  • Make a low initial offer: Start by offering 30% to 40% of the total debt. This gives you room to negotiate. Try to settle for 50% or less of the original debt.
  • Negotiate terms: If you cannot pay a lump sum, ask for a payment plan. See if the creditor will lower the interest rate or remove late fees. Get any agreement in writing.
  • Seek professional help: Consider talking to a debt settlement attorney. They can advise you and may negotiate for you. Be careful with debt settlement companies, as some charge high fees.
  • Understand tax implications: Forgiven debt may count as taxable income. Talk to a tax professional about possible tax results of your debt settlement.
  • Explore other options: If settlement does not work, consider debt consolidation, credit counseling or bankruptcy. Consider each option’s effects carefully.

To settle your debt effectively, you must prepare, persist and sometimes get professional help. You can reach a reasonable settlement with creditors by checking your finances, saving for a lump sum and negotiating well. Always get written agreements and ask professionals for help with complex debt issues.