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Business Debt Relief Options

By Spodek Law Group | February 20, 2024

Business Debt Relief Options

Dealing with business debt can be incredibly stressful. As a business owner, you may feel overwhelmed and unsure where to turn when debts start piling up. The good news is that there are options available to find relief. This article explores strategies to alleviate financial pressures on your business, so you can get back on steady footing.

Negotiating with Creditors

One of the first steps is to open up conversations with your creditors directly. Be transparent about your financial difficulties and see if they can offer some flexibility ([1]). Things to request include:

  • Lower interest rates
  • Reduced minimum payments
  • Extended payment terms
  • Temporarily postponed payments

Approach these negotiations honestly and empathetically. Creditors want to get repaid, so if you can demonstrate good faith efforts to address debts, many may be willing to work with you ([2]).

Debt Consolidation and Refinancing

If you have multiple high-interest debts, debt consolidation or refinancing could be an effective strategy. This involves taking out a new loan to pay off existing debts, ideally at a lower interest rate. This simplifies payments into one monthly loan payment instead of many debts accruing interest.

A few options to explore:

  • Banks and credit unions: Many offer business loans and lines of credit at reasonable rates.
  • Online lenders: Specialized sites like Kabbage and OnDeck provide fast business financing.
  • 401(k) or IRA funds: You may be able to use retirement savings to pay off debts without early withdrawal penalties ([3]). Consult a financial advisor first.
  • Home equity loans: If you own real estate, tap into home equity to consolidate higher-interest business debts.
Pros Cons
Lower interest rates Closing costs and fees
Simplified payments Potentially increased total repayment over time
Immediate financial relief Risk of default if new payments too high

Debt Settlement

With debt settlement, you work with a third-party company that negotiates directly with your creditors to reduce debts owed. The settlement company generally takes a percentage of debts they help eliminate. This route does come with risks, like further damaging credit scores and potential tax liabilities ([4]).

  • Make sure settlement companies are reputable and aligned to your best interests. Research credentials, fees, and reviews thoroughly beforehand.
  • Be prepared for aggressive collection calls from creditors in the interim.
  • There may be tax consequences for settled debt. Consult an accountant or tax attorney.


Declaring bankruptcy allows for liquidation of assets to pay creditors, or restructuring of debts through payment plans under court supervision. There are several types of bankruptcy filings, each with pros and cons to weigh ([5]).

Chapter 7 bankruptcy involves liquidating company assets to pay debts. While this can eliminate large debts quickly, it means ending your current business structure.

Chapter 11 bankruptcy allows you to reorganize debts and repay them over 3-5 years. You can continue operating, but must adhere to court-mandated repayment plans.

Chapter 13 bankruptcy is only for sole proprietorships and very small partnerships with limited debt caps. Like Chapter 11, it enables you to keep the business open on strict repayment schedules.

No matter what form is filed, bankruptcies severely hurt credit scores and public records for years. Weigh this carefully before moving forward.

Other Relief Programs

In times of financial or natural disasters, federal, state, and local governments sometimes offer business relief programs with grants, subsidized loans, or debt forgiveness opportunities ([6]).

  • Research what special business assistance initiatives may be available where you operate.
  • Check websites of the Small Business Administration, state economic development agencies, and local chambers of commerce.
  • Enlist help from a small business lawyer or accountant to identify and navigate appropriate programs.

Create a Debt Repayment Plan

As you pursue the above options, also construct a business debt repayment plan mapping out how you will systematically eliminate obligations ([7]). This should outline:

  • All outstanding debts and primary details like balances owed and interest rates
  • Realistic budgets for directing revenue towards debts
  • Timelines for paying down specific debts
  • Contingencies if repayment struggles emerge

Review and adjust this plan frequently as your financial situation evolves. Staying organized and vigilant about debt obligations makes navigating through challenges much more feasible.

Additional Business Resources

  • SBA Learning Center: Free courses on small business financial management
  • Score.org: Get free business mentoring and advice from industry experts
  • r/smallbusiness: Discuss experiences and questions with other business owners

Getting overburdened with excessive debts feels bleak, but know that avenues exist to regain control over your finances. Be proactive, get informed, and enlist help to protect your business interests. With some concerted efforts and patience, you can achieve stability once more. Stay determined and believe you can weather this storm.


  1. Reddit Discussion – Negotiating Business Debt
  2. Quora – Tips for Negotiating with Creditors
  3. IRS on Retirement Account Loans
  4. Avvo – Debt Settlement Pros and Cons
  5. Nolo – Business Bankruptcy Options
  6. FindLaw – Small Business Relief Programs
  7. Debt Repayment Plan Guidelines

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