Saturday, July 25, 2015, AM | Leave Comment
Times are tougher economically than they have been for decades. Small to medium sized businesses are being hit the hardest and are struggling to pay back debts – particularly if they have debtors of their own who are not paying or not responding to invoices and regular requests for payment.
Having trouble paying creditors and repaying debts can be extremely stressful. One thing which businesses can do to help manage their debt load is to negotiate with their creditors to reduce the debt or at least the interest being charged to them.
Another thing which most businesses should not do is attempt to go through this process alone. Why? These are just some of the common mistakes which businesses often make and why they should consider hiring an experienced debt recovery lawyer:
A Business Does Not Know Whether Their Debt Is Secured or Unsecured
Worse yet, a number of businesses in Australia today have no idea what the difference is between a secured and unsecured debt.
A Secured Creditor: This type of creditor has an interest in an asset or assets which you own. This could be a vehicle, a boat, property, and so on. If the debt you own is not paid, a secured creditor is able to take the property.
An Unsecured Creditor: Unlike the secured creditor, the unsecured creditor allows businesses to purchase goods on credit, but they are not able to take back their merchandise should the business not pay their debts.
Unsecured creditors will often try to take the stance of a secured creditor and will threaten to reclaim their merchandise if payment is not received. This may fool many business owners, but those who understand what kind of debt is owing – or those who are advised by an attorney who is well-versed in this area of the law – will know their rights.
A Business Does Not Understand the Strengths of the Creditor
Secured creditors have a very clear position of strength. They can repossess valuable property which can interrupt or destroy your business operations. But unsecured creditors aren’t without their points of strength.
Unsecured creditors can sue a debtor for breach of contract. Even while you are negotiating with an unsecured creditor, you may receive notice of a lawsuit against you. Stay strong and continue to negotiate with the creditor until the negotiations are finalised.
Unsecured creditors are also well known for continually sending demand letters and placing phone calls despite being in the negotiation stages. Keep in mind that while they will try every tactic they can to have you settle for paying back the possible you still have the right to negotiate.
IMPORTANT: If an unsecured creditor wins a lawsuit against you, it is possible that they will garnish your wages or levy your bank account. Strongly consider seeking professional assistance when negotiating with creditors.
A Business Does Not Offer Cash
We have all heard the expression “cash is king” and this is particular true when it comes to debt negotiations. If you are able to pull together cash to pay off a large part of the debt, a business has a better chance of settling for a lower amount. With that said, try to avoid pulling cash from any retirement funds or using equity as this can create larger problems for you later on.