In order to become debt-free, business owners need a sound debt repayment plan that systematically enables speeding up debt repayment.
Here are common debt repayment schemes which can be used by business owners:
Business owners could personally assess their debt and craft a plan to pay it off. Owners can work out a debt repayment schedule or arrangement with lenders and creditors.. This type of plan often includes secured and unsecured debt repayment.
Consumer credit counselling
Undergoing a consumer credit counselling means that a business owner’s budget will be assessed by a credit counselling agency that provides a customised debt management plan (DMP).
This plan can include a lower minimum payment for each creditor as well as lower interest rates.. Take note that the credit standing will not be affected even if credit reports show that the owner is in credit counselling.
Consolidating debt to combine and integrate all debts into a single loan or credit card can lower overall interest rates. Managing debt repayment obligations can, especially in cases of several debts with different balances and interest rates, make it convenient for owners to tender only one monthly repayment instead of several, staggered payments.
Learn more about the debt consolidation process here.
Debt settlement involves paying a monthly fee to a debt settlement firm that negotiates debt with creditors. A lump sum amount can paid on the principal due and can significantly lower the full amount owed.
When debt settlement is successful, it lowers overall debt by up to 40 to 60 per cent.
Although this payment scheme requires parties to be behind on their payments, there is no guarantee that the creditors and collectors will accept the settlement proposal.
To speed up the debt repayment process:
- List all of debts, including their balances and interest rates
- Rank debts
- Pay off debts in order of priority
- Sell what can be sold
- Strengthen savings
Filing for liquidation
There are several reasons why businesses choose to undergo through the liquidation process. However, this option should only be used after exhausting all other possible alternatives.
Liquidation includes an assessment and evaluation of company affairs and its shareholders, enabling creditors to receive compensation through the sale of all business assets.