Save Your Small Business: Renegotiate Your Debts

Do any of the following sound familiar?

• You own a small business with less than 500 employees
• Your business is closed due to the ongoing coronavirus lockdown
• You’re worried about mounting debts and bills
• You’re not sure what you should do to minimize financial damage

If so, it’s a wise idea to seek legal advice on renegotiating any debts you accrued while building up your business. If your landlord is chasing you for rent, see if you can renegotiate a payment plan.

On Thursday, April 16, US unemployment claims jumped by 5.2 million bringing the unemployment total to a staggering 22 million [1].

The continuing lockdown is starving small businesses of cash flow. Business owners on average have 27 days of funds to see them through crises. That said, many have less than 20 days of funds and face the prospect of closure.

A full lifting of lockdown restrictions seems some time away. In the meantime, business owners are increasingly worried about the survival of their business. If you can get your debts restructured, you might be able to save your business so you’re ready for when the economy snaps back into action.

The survival of your small business is vital to the US economy.

• Over 2 million jobs are generated by the small business sector every year
• 47% of the workforce is employed by small businesses
• 44% of US GDP comes from small businesses

So, what can you do in these troubling times?

Karen G Mills of Harvard Business School urges small business owners to renegotiate their debts with their landlord and debtors to mitigate costs [2].

Mills also points out that the government already pledged $7 million in disaster loans of up to $2 million for small businesses. These loans are repayable over 30 years at rates of 4% or less. The government is currently considering another $300 billion in funding.

Taking on further debts in such uncertain times is probably the least desirable option. Persuading lenders to renegotiate your current debts is arguably the smartest initial approach you could take if you’re struggling to keep your head above water.

To renegotiate your loan, you need to speak to your lender as soon as possible. You also need to document your financial situation and present it in a way that will get your lender to agree to restructure your debt.

Unfortunately, this can be a struggle in itself and it needs to be done promptly so you don’t default.

Your lender is likely to be overwhelmed with inquiries just like yours and they are also under pressure to meet their own financial obligations to the bank despite the government order to go easy on borrowers.

Expect lengthy periods on hold and extended processing times. Be realistic and pack plenty of patience.

That said, if you use a lawyer, you can cut through this bureaucracy much more effectively.

A restructuring attorney can handle all matters on your behalf and get an out-of-court settlement. If your financial matters are more complicated, your debtor might want to protect themselves by going through the bankruptcy court system [3].

Your debtor may hire a good lawyer to act on their behalf. In this case, it’s prudent to use a restructuring lawyer who can fight your case and stop your creditors from bullying you.

Trying to navigate the complex legal system alone without the help of a lawyer is risky at best. If you hire an attorney specializing in debt and foreclosure, you have a much stronger chance of getting your loans successfully restructured.

Remember the following:

• There are many unscrupulous companies out there only concerned with avoiding bankruptcy themselves. Hiring a lawyer to protect your interests is an investment rather than an expense
• An experienced attorney understands the law and knows the obligations lenders must meet legally. They will know whether your lender is acting within the law and will protect you if they are not
• Restructuring attorneys have established relationships with lenders. This puts them in a powerful position to negotiate on your behalf. They can also have interest payments deferred
• Handling financial and legal matters takes top-notch negotiation skills, detailed knowledge of the law, and experience. Attorneys know the underhand practices some lenders employ to bully people.
• If you hand your case to a lawyer, your debtors are legally required to liaise with them so you are shielded from harassment from debt collectors
• Debtors are legally obliged to respond to any correspondence with a lawyer within a certain time frame. This will speed up the processing time
• An attorney can prepare your financial information in a way that will convince a lender to restructure your loans

Even if you feel you can’t afford to hire an attorney to restructure your debts on your behalf, it’s certainly advisable to at least seek consultation to put you on the right track.

Law firms understand that you’re in a sticky spot financially and often allow you to pay in installments.

You may want to consider hiring a foreclosure lawyer for part of the process. If you get stuck at any point, there’s no reason you can’t ask your attorney to pick up the case again.

If you decide to save money by negotiating yourself, you could be setting yourself up for a world of stress and frustration.

The current financial crisis means that millions of small businesses are fighting to save their businesses just like you are. Lenders are flat-out dealing with huge volumes of inquiries daily. This means being on hold for hours and often being given conflicting information with each call.

Even if you manage to finally speak to a lender, negotiating with them will be tough as they are under considerable pressure, too.

It’s worth throwing whatever you can into hiring a good restructuring attorney. You’ll dramatically improve your chances of saving your business.

Time is of the essence. The sooner you contact an attorney to get your debt restructured, the more chance you’ll have of saving your business.

You need your small business to survive. The economy needs your business to survive.

It’s time to act smart. Is it really worth the risk not to?