It’s no secret that to operate a small business, the owner needs
access to money. Whether the business is a startup, in growth-mode, or
is experiencing seasonal fluctuations, lack of capital can be a recipe
for disaster. Business owners might seek financing through bank loans,
SBA loans, lines-of-credit, credit cards, or even by taking a Merchant
Falling behind on business debts can be nerve-wracking, especially if you
don’t have a plan. The first steps to figuring out the potential
options for relief is to determine the type of debt, it’s status,
and whether there is a personal guarantee.
Our lawyer’s help struggling business owners find solutions to their
debts. We explore options to restructure the loan into affordable payment
plans, and when possible, we help
settle business debts and reduce or eliminate interest fees. We also fight lawsuits that arise
from debts owed to business creditors. At the Law Office of Simon Goldenberg,
PLLC, we want to see you succeed and your business grow.
Need Help Reducing Business Debts? Speak to our seasoned negotiators today!
Call (888) 301-0584 or
schedule a free evaluation.
Secured vs. Unsecured Loans
Small business loans will fall into one of two categories: secured or unsecured.
Your loan may be considered “secured” if you agreed to place
collateral as security for the loan.
For businesses, collateral may include things like inventory, real estate,
company assets, and equipment. Although a secured loan might offer a lower
interest rate as compared to an unsecured loan, it will put the borrower
at risk of losing the collateral in the event of default.
In contrast, an unsecured loan does not have any collateral or tangible
security. It is given based on the borrower’s ability to meet repayment
demands, evidenced by the borrowers credit report, credit score, length
of payment history, and other criteria.
Common kinds of unsecured loans include personal loans and most credit
cards. Unsecured loans typically come with higher interest rates because
there is no collateral to collect in the event of default. An unsecured
creditor would generally have to bring a lawsuit and obtain a judgment
in order to collect through involuntary methods such as garnishments,
liens, and bank restraint.
Merchant Cash Advance vs. Business Loans
Merchant Cash Advance (MCA) is another means for a business to obtain capital. Although a Merchant
Cash Advance might appear similar to a loan in that you get the money
that you need upfront, and then repay in installments, it is not a loan
and there are distinct differences. Primarily, the lender granting a Merchant
Cash Advance is actually purchasing discounted receivables from the business’s
merchant processing account (the credit card terminal).
MCA’s usually require payments made on a daily basis, whereas, a
loan would generally require monthly payments. Furthermore, the payment
schedule on a Merchant Cash Advance might fluctuate periodically in relation
to the amount of receivables actually coming in through the business’s
merchant processing terminal. The creditor will receive a portion of your
sales as they are made.
When a small business experiences a reduction in revenue, the daily payments
required to repay the cash advance can become unbearable. And when a borrower
defaults, cash advance collections are oftentimes aggressive and persistent
in their efforts to recover money. To make matters even worse, the federal
law (FDCPA) that provides extensive debt collection protections to consumers
is inapplicable to business debt collectors, including merchant cash advance
debts. Furthermore, some Merchant Cash Advance lenders tend to bring
debt lawsuits much quicker then most credit card and business loan lenders. Sometimes
they sue within just a few months of the last missed payment.
What is a Personal Guarantee?
When a business applies for a loan or a credit card, the creditor will
oftentimes require an authorized officer of the company to promise that
if the business does not repay the obligation, the officer's personal
assets can be pursued. Unless the business has extensive credit history,
most banks will not approve unsecured financing to a business without
having the personal guaranty of an officer that has sufficient credit.
In the event of default, the creditor might pursue collection efforts against
the guarantor, including reporting negative credit information, and the
lender may elect to bring a debt collection lawsuit against both the individual
and the company. A personal guarantee is a powerful tool for a lender
since it might be more viable to collect from the personal guarantor as
opposed to a business that's in financial distress.
Get Relief From Business Debts
Regardless of what's causing the financial strain, it’s prudent
to act sooner than later in order to avoid the most serious consequences
of defaulting on business debts. For many New York businesses that are
struggling to find their footing, even the smallest financial slip can
cause their doors to shutter permanently. Depending your your situation,
you will want to explore settling the business debt for a reduction, restructuring
the loan with affordable payments, or even filing for bankruptcy to discharge
the personal guaranty liability.
business debt reduction lawyers can be by your side to shield you from incessant calls from debt
collectors and give you the confidence to know that you have an advocate
working to negotiate your loan terms while you focus your time and energy
keeping your business afloat. Business debt settlement can help reduce
the amount of overall debt, and can potentially help avoid filing for
We strive to achieve the best possible outcome for each client’s
unique situation. Contact the New York lawyers at the Law Office of Simon Goldenberg, PLLC
to learn how we help business owners settle their debts, sometimes at
Call 888.301.0584 today to request your
free evaluation for settling business debts.