When you are unable to pay the EMIs for your Business Loan on time, people often look towards a Settlement Plan. The main aim of this process is to decide on a Settlement amount with the creditor (Bank/NBFC) that is less than the original amount owed and is feasible for your business. By repaying this amount, you can free yourself from the obligation.
Financial challenges are common in business, and there can be several reasons why you might need to pursue a loan settlement:
Financial Hardship: Such as a situation like COVID-19 or a sudden market slow-down.
Decline in Revenue: If your business's sales or income has significantly decreased.
Increase in Operating Costs: Unexpected increase in expenses.
Business Closure/Stalling: If the business is not running properly or is on the verge of closing.
When Banks or NBFCs do not easily agree to a Settlement and put pressure for recovery, businesses often need help in this process.
Yes, absolutely! Similar to personal loans, if your business loan is unsecured (meaning major collateral was not provided), you have the option to negotiate with the lender.
Lenders also know that if they get zero recovery (i.e., the loan is "written off"), their loss is greater. Therefore, they may be willing to recover some amount through a Settlement, especially if your business is facing difficulties.
As soon as you feel the next EMI might be missed, it is important to take these steps:
Contact the Lender: Explain the situation as soon as possible to your Bank/NBFC. Be transparent with all the details.
Ask for a Repayment Plan: Request temporary relief such as an EMI moratorium or re-structuring (reducing the EMI and extending the repayment period).
Consider Settlement: If these options don't work and you are at risk of default, then negotiating a Business Loan Settlement might be a final option.
There are mainly two options for Business Loan Settlement, which you can choose based on your financial capacity:
Lump-sum Settlement:
If you can arrange a small amount in a single payment, this is the best option.
Lenders prefer this option more because they receive immediate cash, and it gives you greater negotiation power.
Monthly Payment Settlement:
If you don't have the funds to pay the entire Settlement amount at once.
This involves making smaller payments over a longer period. Lenders may be less interested in this, but if you assure consistent payments, it is possible.
If you are thinking about pursuing a Business Loan Settlement, these tips can help you:
Gather All Financial Data: Keep your business's balance sheet, P&L (Profit & Loss) statements, bank statements, and all other financial documents ready. This strengthens your position.
Be Ready to Negotiate: Always start the negotiation with a low offer. Do not start making payments until you receive the Settlement Letter. Convince the lenders that you are serious but your business's capacity is low.
Be Patient and Persistent: The Settlement process takes time, and sometimes you have to talk multiple times.
Become Debt-Free Quickly: After settlement, you can quickly free your business from that large debt.
Reduces Stress: The fear of recovery calls and legal action decreases.
Better Impact on Credit Score: Closing the debt as a 'Settled Account' is much better than having it 'Written-Off' or 'Default'. This results in a less negative impact on your business’s future creditworthiness.
If you are confused about where to start with debt relief, or if you are troubled by harassment from the Bank/NBFC, you can seek assistance from a Debt Settlement firm.
Firms like AHK TIPS Financial Consultants specialize in helping borrowers (debtors) negotiate Settlements with creditors.
While there is a fee for their services, their biggest advantages are:
They can help you achieve a lower Settlement amount.
They can help stop the potential harassment you might face from the Bank/NBFC.
They have the expertise to deal with the Bank effectively, which makes your work faster and better.
If you need help settling a Business Loan or a Personal Loan, a company like AHK TIPS is here to help! No matter what your situation is, they can negotiate a feasible Settlement that works for you. You may be eligible to settle your loans as soon as within 90-120 days of signing the agreement, so apply now and start getting debt relief ASAP!
Founded in 2015, Ahk Tips is a New Delhi-based financial advisor specializing in debt relief and loan management solutions.
