Understanding Debt Settlement 

Debt settlement is a process intended to reduce the amount a person may owe or to extend the terms of the loan. Oftentimes the contracts are based on cash flow. If cash flow decreases, you may be entitled to adjust the terms of your loan. If cash flow later increases, a one-time lump sum payment offer of a portion of the debt in return for forgiveness on the remaining balance is possible.

Debt Settlement Options

All major financial decisions have pros and cons and businesses must consult qualified professionals. Continue reading to learn more about debt settlement options for businesses and how an attorney can help. 

Merchant Cash Advances (MCAs)

A merchant cash advance (MCA) is a type of business funding that provides quick access to working capital. It is an alternative to traditional bank loans and is based on a percentage of future credit cards or other receivables. With an MCA, businesses receive a lump sum payment in exchange for agreeing to repay the lender with a portion of their future sales. This type of financing can be beneficial for small businesses that need quick access to funds but may not qualify for traditional loans due to poor credit or lack of collateral.

The eligibility criteria for an MCA vary from lender to lender but generally include terms related to the duration of the and processing a set amount of monthly sales through debit and credit cards. The repayment schedule is typically flexible and based on the amount of money received from customers via debit or credit card transactions. The application process is usually straightforward and can be completed online depending on one’s circumstances. Factors that influence approval include the business’s credit score, annual revenue, and time in business.

Merchant cash advances can be especially helpful for seasonal businesses or those with unstable cash flow who need fast access to funds without having to go through the lengthy process required by traditional lenders. However, it is important to note that merchant cash advances tend to have higher interest rates than traditional loans, so borrowers should carefully consider all their options before opting for this financial solution.

These loans tend to be very favorable to businesses who have a reduced cash flow and are in immediate need of a renegotiation in order to better reflect their current financial situation. Businesses, however, should be aware that defaulting on these loans gives the creditors a lot of triggers to force the business owner to pay (including UCC liens, freezing of bank accounts, etc.). For this reason, having a skilled professional guiding you through the reconciliation process is so important. 

Paycheck Protection Program (PPP)

The Paycheck Protection Program (PPP) is a loan program designed to provide financial support to small businesses affected by the COVID-19 pandemic. The primary purpose of these loans is to help businesses maintain their workforce and cover essential operational expenses during times of economic uncertainty. Eligible businesses include those with 500 or fewer employees, including non-profits, self-employed individuals, and independent contractors.

PPP loans can be used for payroll costs, rent, utilities, and interest on mortgage obligations, helping businesses sustain their operations amidst the crisis. The program was established under the Coronavirus Aid, Relief, and Economic Security (CARES) Act in 2020, aiming to protect small business owners and their employees from the devastating impacts of the pandemic.

A key feature of PPP loans is their potential for forgiveness, which means that borrowers may not have to repay the loan if they meet specific criteria. To qualify for forgiveness, businesses must use at least 60% of the loan proceeds for payroll costs and maintain employee headcount and compensation levels during the covered period. PPP loans come with a low-interest rate of 1% and a maturity of five years for any unforgiven portion.

To apply for a PPP loan, businesses must apply form through an approved lender, such as a bank or credit union. The applicant must provide documentation to demonstrate their payroll costs, number of employees, and other relevant business information.

Lawers That Get Results

The bottom line is we will help you. With the team at Raiser & Kenniff, P.C. representing you, you can have that peace of mind knowing you will be treated fairly and with respect. We will fight for you. 

“Steven M. Raiser is the managing partner and litigator assigned for trial in the unlikely event that one becomes necessary.”