Maybe you had a small business before the pandemic hit the United States, or perhaps you lost your job and decided to strike out on your own. Either way, small businesses have had a tough road in 2020, and you may have more debt than you otherwise would have. It’s typical for companies to struggle to turn a profit in the early stages of existence, but those hardships were likely magnified by the pandemic.
Bringing your total debt down should be high on your priority list if you want your business to succeed. While you manage your business and get a handle on your liabilities, you should know your rights when it comes to collecting debts.
Which End Are You On?
If you have outstanding debts from loans to keep your business from going under during this time, you want to use whatever means you can to pay those down. Carrying that debt will be like an anchor on your business, preventing you from moving and growing.
One way to focus on your debt is to collect money from consumers who owe you, and the best way to do that is to use fair practices. Nothing prevents you from collecting your debts, but you have to follow the Fair Debt Collection Practices Act (FDCPA). The FDCPA is a federal law dictating how you can manage those collections. As long as you follow the practices, you can collect the money people owe you and use that money to pay down your own business debts.
In addition to those collections, you might consider consolidating as much of your debt as you can so that you can have one payment and one interest rate to focus on.
Bankruptcy Is a Long Process
If your business is too far in debt, it might cross your mind to declare bankruptcy instead of making a plan to pay your obligations in full. But bankruptcy doesn’t necessarily get rid of all your debt. In fact, you could declare bankruptcy, which is a lengthy process, and still be responsible for paying your debtors. On top of that, you’ll ruin your personal credit, depending on your business model. At the very least, your business will be in jeopardy.
Even if you do decide this path is best for you and your business, the regular slowness of the court system is even more so now because of COVID-19. In that case, your best bet is to make a plan to consolidate and pay your debts, collect on monies owed, and ready your business for future growth.
There’s a Better Path
Aside from debt consolidation to simplify your business debt, there are other avenues you could consider to collect your debts outside the court system. For instance, you can work with your customers and agree on a payment plan, using that income to pay down your liabilities.
In fact, you can work with your own debtors to see if they will agree on a payment plan or a reduced bill for you as well. It doesn’t hurt to ask, and it might just save your business and its reputation.
Restructure and Relief
As you try to navigate your business through the pandemic, remember to stay flexible and think outside the box when it comes to the debt you owe and the debt you need to collect. The rules that apply to your business in collections also apply to those trying to collect from you. Once you know the rules, you can make a plan to keep your business running.
If you’re using debt to keep yourself or your business afloat, remember that it is not a sustainable plan. Working with a financial advisor can help give you ideas on how best to succeed. And if you have debts to consolidate, contact Georgetown Funding to bring that debt under one umbrella and eliminate it for good.