The ultimate goals of business debt and expense negotiations can vary however the immediate goals are similar: to expend less financial resources toward’s the businesses operations. These immediate goal can be accomplished through agreements with creditors to pay less or have more time to pay debts and/or obligations. Payment terms can be improved by decreasing or eliminating interest, reducing principal, differing or forgiving arrears, enlarging the period of repayment and/or lowering monthly payments towards the business debt installments. The ultimate goals may be reorganize the business during an economic downturn, to scale down scale down the business with the goal of closing it, and/or to find ways to address particular problem debt. Whether what’s sought is a reorganization and reworking of the business or a focused negotiations for an otherwise healthy business or a way to safely reduce business obligations with a goal of closing in an organized fashion, business debt negotiations seek to either reorganize, reduce, and/or eliminate business debt.
Where the goal of business debt negotiations is to scale down regular business expenses, as well as business debt in order to keep the business intact with a small scale of monies going out when there is less money coming in. This is especially true if the health, future and potential survival of the business is in question. The question is the degree to which there needs to be a scale down. The answer is that unless the business is being supported by incoming loans and other financial support, the business will need to survive on its accounts receivable (and monies on hand) which is essentially dictating that the outgoing expenses and debt servicing be supported by the incoming finances. Businesses when they start typically under perform and need loans and cash infusions to start. Similarly, when businesses are going through a hardship or a growth phase they will also often need such support. However the goal with all business endeavors is to make them profitable or at least self sustaining, and therefore Most debts and most expenses can be negotiated, especially at a time the business itself and/or the economy are experiencing hardship (ie, during the Covid-19 pandemic and consequent business lockdowns and economic slow down).
A business has many outgoing monetary items. The terms and characteristics for these vary and often can cause confusion through loose use of these terms. These terms include: “Business Debt”, Business “Expenses”, Business “Obligations”, Business “Overhead”, Business “Outflow” etc. Because here we need to concentrate on different ways to negotiate different debts, we will try to be more precise with these terms and will define them for the purposes of this web page as follows:
The “Essential Elements” in negotiating debt are usually put into a written and signed contract or a lease or could also be oral arrangements or could be customary terms in an industry that that are understood by all parties. Often a creditor may be more flexible with some elements than others; for example an element like the total amount of the debt may be inflexible to a creditor, but the same creditor may be much more flexible with the time to pay the debt and the interest rate, essentially giving the debt much better terms for repayment Once we determine which elements are “Anchor Elements”(inflexible terms) and which are “Softer Elements”(subject to some negotiation) and which are “Fluid Elements” (subject to a great deal of flexibility) we can know how to negotiate with a creditor.
These Essential Elements in negotiating debts or expenses are as follows:
The question is often how and what to negotiate with business debt and expenses and the answers are often situational and depend on what is needed by the business and what is potentially acceptable for the creditor to negotiate. Below are ways to negotiate debts and expenses that are possibilities but which are are case by case specific:
All business debts can be negotiated as to their terms. Each type of business debt or obligations has terms as to amounts due, time given to pay, interest, additional payments, security or guarantees given to assure payment and other conditions. Generally all or most of such terms are negotiable. The types of business debts that can be negotiated are:
In order to obtain concessions from creditors for business debt there need to be tools with which to negotiate or to motivate a creditor to give the borrower better terms. These tools can be positive motivators (“carrots”) like payments, security, guarantees OR negative motivators (“sticks”) like the threat of non-payment, bankruptcy and/or litigation. Usually before a negotiation starts an evaluation needs to be made as to what is being offered to the creditor to motivate them to give concessions. The business agreements (contracts, leases or other signed agreements) themselves are a place to start to see when and under what conditions can the debtor/borrower pause or stop making payments and/or seek resolution to a dispute in arrangements. Usually ambiguities in agreements or changed conditions can be used to support a position that favors the debtor/borrower.
Alternatives to Business Debt Negotiations are alternatives that are usually in the background of these types of discussions and are often taken into account in the party’s assessment of their respective bargaining positions. These alternatives may be pursued if negotiations do not work out and/or simultaneously with negotiations to pressure the other side into a better deal. The alternatives are as follows:
Our office has strong negotiation capabilities in seeking a broad array of possible negotiated outcomes. However what gives us more leverage than the average business person or attorney, even if they are a savvy negotiator is the leverage that we have by impliedly or sometime vocally showing creditors that the business and business owner have alternatives in terms of litigation and bankruptcy options and some “good cards to play” that we can leverage to get the business owner a better negotiated deal.
We start out by meeting with you and understanding your facts, goals and challenges. The initial consultation will lay out alternatives and options in what may be a complex and difficult situation. If you decide to use our services we will then do an intake for get more detail and documents form you in order to pursue your negotiated business debt matter. If you do retain us, we will enter into a retainer agreement that will clearly lay out the terms of our retention.
Please contact us for a free legal consultation regarding negotiating business debt and other other business obligations at 631-271-3737.
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