Difficult times are not for simply hunkering down and waiting out the storm. It’s a time for courage, creativity and action.
Is your business struggling financially? Have you been forced to lay off employees? Are you late paying creditors?
If so, your creditors fear the worst. You probably do, too. Maybe there’s a win-win here?
You need to reduce your debt load. Some of your creditors may want to minimize their exposure. If you can come up with cash to apply toward debt reduction, it could be time to deal. Offer a lump sum payment in exchange for debt forgiveness?
Be sure they understand that you remain committed to paying them in full. But if they’d be willing to give you an incentive, maybe you could part with some of your scarce cash. Liquidate other assets, such as personal ones, and come up with liquidity necessary to satisfy them.
You both might be able to get a little of what you both want and need in this less-than-desirable situation.
If you work out a deal, be sure to put it in writing. And be aware that any debt forgiven is taxable income. But if your business is performing poorly, you likely have losses you can use to offset any gain.
Finally, be careful not to sour a relationship. Be sure your creditors see the deal as a positive development that allows them to trade an uncertain future for a certain one.
This article originally appeared in The Business Owner Journal, the periodical of choice for owners of small and midsize private businesses. All rights reserved, D.L. Perkins LLC. © 2012.
This publication is intended to provide general information on the subject matters covered. It is sold and distributed with the understanding that neither the publisher nor any distributor or advertiser is engaged in providing legal, tax, insurance, investment or other professional advice. The advice of a qualified professional should be sought before any reader applies a concept presented herein to his or her particular situation or business.
D.L. Perkins, LLC is solely responsible for this content.
