If you owe a lot of money to your creditors, and unable to pay back; then you need some negotiation skills to solve the situation. You can talk directly to the banks from where you borrowed money to set up your startup business. It all depends on your persuasion abilities to pay the money you owe them or less what you originally borrowed. Now, this method works fine for debts that have accumulated for some time. Your creditors, noticing that you have missed payments repeatedly, may want you to negotiate or talk about some settlement. That is because partial payment is much better than zero payment. Debt settlement is a good idea because you have defaulted for 90 days, but more practical if you have failed to clear due for five to six months or so. There is nothing so much to worry. There are many ways to manage your debt. We recommend that you consult with a professional debt settlement provider instead of dealing with it yourself. According to https://www.entrepreneur.com, negotiation is an upsetting experience, and if creditors are reluctant to talk, you can seek the assistance of a debt counseling agency. On the contrary, if you know the art of negotiating the payment terms, there is nothing like it. Here four essential tips to negotiate your debts for the smooth operation of your startup:
- Learn about the Terms and Conditions
You’re expected to negotiate two important things. First, how much you can afford to repay and second, how it will reflect on your credit report. According to loan and debt experts in the country, you should be able to settle your dues for 40 percent to 50 percent of the principal borrowed. When you try to figure out how to settle your borrowings as the ratio of what you owed, you also consider how much money you can shell out as a tangible dollar amount. Focus on your budget and what that amount is. Remember that you will need to pay taxes on the part of your borrowed money that is waived off if the figure is $600 or more.
When it comes to your credit, it has been damaged by delinquent marks due to missed payments by the period you become fit to settle. You may cash in though if you clarify how the settled amount is reflecting on your credit report. It is important to note that settled loans are usually marked ‘Settled,’ and it does not look great on your report. To avoid this, you must persuade your creditor to mark the settled money as ‘Paid as agreed’ to reduce the damage on your credit report.
- Figure out Your Eligibility
Before you consider debt settlement for your startup, you must consider the following aspects:
- Determine if your borrowed amount is already delinquent or not. It means that many creditors will not accede to settlement if your debts are not 90 days at least. You will have a better possibility to settle when your debt is about five months delinquent.
- Ask whether you have enough money to settle the borrowed money. That is because many creditors ask you for a lump sum. However, you will find creditors who will ask for payment plans. To cut a long story short, you should have adequate cash to support any settlement contract.
- Do you have confidence in your negotiation skills? If you have it, that is the key to an easy settlement. Additionally, you should look up companies with good debt settlement ratings, if you feel that you cannot negotiate yourself.
- Be Proactive
Persuading your creditors is no easy job. It calls for your time, patience, and persistence. Remember it is the most critical moment in the process of settlement. There are chances that you can settle your deal in just one day, or it may require you to make multiple calls to come to an agreement that is beneficial for you and your creditor. If that is the situation, make calls. Be proactive and don’t procrastinate thinking that everything will fall into their place just like that. If one representative is not ready to listen, try talking to another professional who is more accommodating. Do not lose patience. Keep trying. You may also need to consult with a manager if all the representatives are reluctant to cooperate.
Make sure that you approach your creditor with a clear narrative. There is no point in beating about the bush without making your point. It is wastage of time for both you and your creditor. Talk saying that you have financial constraints and that is why you missed payments. This way, your creditor will show more compassion for you. State in clear terms the amount you can pay. You should try low-balling, and work to come to a middle ground. If you know that you can pay off 60 percent of the debt, offer to pay about 45 percent. However, do not speak an amount that you cannot pay off. There is no use making promises and not living up to them.
- Close the Deal
Before you agree to pay any amount, make sure you have the terms and conditions of the settlement as well as the credit report in black and white. That is because a well-documented contract will make both you and your creditor accountable. Both of you will have to abide by the agreement. This time, do not fail to make payments. Else, your creditor will pull back the settlement contract; you land up where you had begun. You will end up in a big soup. Therefore, do not violate the terms of the agreement. The same rule holds if the creditor tries to manipulate the payment terms later. You can take action in such a scenario.
Settling your debt is about honesty and commitment. If you make payments, you move on and can focus on your startup business. If you default even after the settlement agreement has been prepared, you will be in trouble. Consider these guidelines if you want to settle your debts and become a successful entrepreneur easily.