Negotiating With Creditors for Business Debt Settlement Deals
Make a List of Hardships Leading to Debt
Before picking up the phone, document what challenges led your business into debt in the first place. Common reasons include:
- Economic downturns
- Supply chain disruptions
- Loss of a major client or contract
- Unforeseen expenses like repairs or medical bills
- Expansion plans that didn’t pan out
Jot down details about any hardships or setbacks your business has faced recently. Creditors are more likely to offer reasonable settlement terms if they understand the context behind late or missing payments. Having notes handy can also help you explain your situation clearly and calmly on calls.
-Calculate What You Realistically Can Pay
Next, analyze your current finances to determine what settlement offers you can afford to commit to. Ask yourself questions like:
- What is my average monthly revenue?
- What are my minimum operating expenses?
- What is my current cash flow situation?
- What amount can I confidently direct towards debt payments each month?
Crunch the numbers to land on a monthly payment figure you know you can manage on top of regular business expenses. That number will serve as your starting point for negotiations later.
Prioritize Your Business Debts
With a target payment amount in mind, make a list of all outstanding business debts and rank their priority level.
Debts that threaten essentials like utilities, inventory/supplies, or equipment should take top priority. Defaulting on those could directly hinder your ability to operate and generate revenue.
-Next in line are major debts like lines of credit or loans. Defaulting won’t immediately disrupt operations but will quickly trash your business credit.
Lower priority debts may include smaller supplier invoices or miscellaneous expenses charged to credit cards.
Use this ranked list to guide which creditors to contact first when proposing settlement offers. Getting urgent essential debts resolved can provide some quick relief as you continue tackling the rest.
Prepare Your Negotiation Approach
Now it’s time to start reaching out to creditors. But first, spend some time preparing your negotiation strategy and talking points.
Highlight Hardships Upfront
Briefly explain the context and challenges that made you fall behind upfront on calls. Creditors are more likely to sympathize with temporary setbacks out of your control.
-However, take care not to overshare or sound like you’re making excuses. The goal is to provide context, not defend yourself.
Start Low with Offers
When proposing a settlement amount, start on the low end of what you determined you can realistically afford. If you can swing $500 monthly, initially float something like $300.
There is usually room for back-and-forth negotiation before landing somewhere in the middle. Starting low allows that flexibility.
-Listen More Than Talk
Don’t dominate calls by talking nonstop about your situation. Listen closely as creditors share their perspective and concerns. Address any pressing issues they surface directly in your responses.
Active listening builds rapport and makes negotiations feel like collaborative problem solving rather than adversarial debates.
Keep Emotions in Check
When discussing financial struggles, intense emotions can bubble up. Anger, desperation, or defensiveness won’t serve your negotiations well though.
If you feel emotions rising, politely ask to pause the call for a few moments. Take some deep breaths to regain composure before continuing the conversation with a level head.
Send Settlement Offers in Writing
After initial phone calls, follow up any verbal settlement offers in writing. Email key details like:
- The original debt amount
- The proposed reduced settlement amount
- Timeline for payment installments
Getting written confirmation makes things official. The email also creates a paper trail in case any confusion arises down the road.
Before sending your message, re-read carefully to confirm all details are clearly articulated. Having to renegotiate later due to miscommunications will slow everything down.
Be Persistent and Patient
You likely won’t land ideal settlements in a single phone call. More often, multiple back-and-forth communications are needed before reaching agreements.
Don’t get discouraged if your first few offers get rejected. Be willing to negotiate, compromise, and revise terms rather than giving up completely. Persistence and patience are key.
Similarly, don’t rush or pressure creditors for immediate responses. Give them reasonable timeframes like 5-7 business days to consider proposals internally before following up.
Consider Getting Help from a Credit Counselor
If you hit roadblocks negotiating on your own, consider enlisting help from a nonprofit credit counseling agency. Counselors have extensive experience negotiating with creditors and can serve as an objective intermediary.
Nonprofit agencies charge small fees compared to for-profit debt settlement companies. And their goal is finding win-win solutions rather than maximizing profits.
Don’t Fall for Harassing Tactics
Unfortunately some creditors or collectors resort to harassing, abusive, or outright illegal tactics like:
- Yelling, cursing, or insulting language
- Threats to garnish wages or seize assets
- Calling repeatedly in a short timeframe
- Refusing to verify the debt is valid
If you experience this behavior, send written notice insisting contact cease immediately until the creditor can interact professionally. Under federal law, they must comply with no-contact requests.
Reporting any harassment to agencies like the Consumer Financial Protection Bureau creates a useful paper trail too.
Keep Detailed Records
Document every communication with creditors by taking notes about:
- Who you spoke with and their title
- Date, time, and length of calls
- Settlement offers made and responses given
- Any next steps or follow-ups agreed to
Careful notes prevent confusion down the road. They also come in handy if you need to demonstrate good faith efforts to resolve debts but hit snags with uncooperative creditors.
Don’t Neglect Other Aspects of Your Business
It’s easy to get consumed entirely by debt issues and lose sight of daily operations. But allowing your business’s core products/services to decline would only make the financial situation worse long-term.
Be sure to continue:
- Marketing to attract new customers
- Delivering quality goods/services
- Providing good customer service
- Innovating and improving over time
Keeping momentum in these areas ensures you’ll still have revenue incoming to direct towards settlements.
Consider Long-Term Changes Too
While settlements provide short-term relief, also assess what business model tweaks could strengthen your financial footing long-term.
For example, depending on your situation, options like raising prices, cutting unnecessary costs, or finding more profitable products/services could help avoid future debt issues.
Don’t view settlements as a quick fix and then continue with status quo. Make proactive changes to support stability beyond the negotiated repayment plans.
Don’t Lose Sight of Humanity
Lastly, remember there are human beings on the other end of these financial transactions. Expressing empathy, compassion, and understanding can go a long way towards more constructive negotiations.
And if a creditor offers you flexibility or agrees to reduce interest rates to ease repayment burdens, express sincere gratitude. A little good will can make challenging conversations more smooth for all involved.
With preparation and patience, negotiating business debt settlements directly with creditors is very doable. But don’t hesitate to enlist help from professionals if you get stuck. The key is being proactive, persistent, and solution-oriented until all outstanding debts get resolved.