Steps to Managing Loans and Debt in an Organization

Written By Steps To Faculty Published April 30th, 2010

Acquiring business loans to start, sustain or expand a company’s operations involves the risk of getting into another spiraling debt trap. First are debts that are as a result of non-payment of dues or obligations. Sometimes businesses may opt to acquire goods or services on loans or borrow money to run its operations. If these goods are not settled promptly, they can lead to business debts.

Second, bad debts that emanate due to pending settlement of accounts by customers or debtors. This can have an adverse effect on the liquidity of the business. Debt can also be used as a measure to balance the liquidity of the firm to ensure that the firm is stable. Although, if too much debt is employed, can lead to illiquidity of the firm and hinder its operations. Business debt management involves managing the company’s debts to sustain the long and short-term objectives of the firm.

Step 1 Negotiate with creditors

Engage qualified professionals to discuss the debt and negotiate with lenders about methods for repayment. Discuss options of short selling or partial liquidation of accounts receivables to cover some of the loan amounts owed to creditors.

Step 2 Enter into agreements with suppliers

Your business enters into an agreement with its suppliers for debts on the debt limit, the loan’s turnover time and the charges involved in loans sales. Commit to debt elimination. This is aimed to maintain the various company’s debt, for instance it can decide to eliminate 100 percent loans card debt within a certain period.

Step 3 Consolidate

Third, the firm can unveil a consolidation plan. This will assist in consolidating all the firm’s debts into one single debt and instead of the firm making many monthly installments; it only makes one payment to a single debt. Debt consolidation loans are charged a lower interest rate on a straight-line basis as compared to the cumulative interest charged on debts or loans. Consolidation plan can be achieved through debt settlement, loans cards and business equity.

Step 4 Declare bankruptcy

Finally, if all the above fails the last alternative is bankruptcy or liquidation (Chapters 7). The firm can be declared bankrupt by a court of law. Although there will be a record for 10 years, your firm can begin again with a clean slate.

Remember, the debt trap can be avoided through careful planning.

Roger Due

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