Learn more about the most important debt forgiveness workout.
While most debt forgiveness experienced in workouts that we focus on is on the secured bank debt, the big loan, the bank being with high value and a well-secured creditor, as it is secured by your assets and your guaranty in most instances and thus is the primary focus for resolution.
However, this is not always the case, that this secured loan is the most damaging, as the reality is such debt is usually serviced monthly over a longer period than the commitments owed to unsecured creditors or vendors, which is supposed to be paid off in full in thirty days. Therefore the secured bank debt may have less impact on the borrower than the unsecured debt due in net thirty days.
We all know that vendor debt can be stretched out to 90 or 120 days or more before the vendor cuts you off and begins to consider a legal process to collect but the truth is vendor debt can be incredibly crushing because of its short term payback requirement.
Thus while $300,000 of bank debt may be an issue, the obligation may only be $4000-5000 per month depending upon terms. Even if it’s $8000 per month on a shorter term, the same vendor debt of $300,000 is intended to be paid in 30-60-90 and represents over a hundred thousand dollars per month. Now that’s a large sized cash flow problem. Sure you can change vendors but this issue is going to become a real challenge to your business life very soon and must be dealt with, or it too can put you out of business.
The short time expectation for payment is the killer and frequently far more devastating the bank note which is paid over a longer amortization period.
Often our strategies refocus the debt workout to eliminating the vendor debt rather than the bank debt for this very reason. Take the vendor debt out, and the bank debt is supportable, and the business can move on. Other times we must perform debt workouts on both secured bank loans and unsecured vendor debt.
We have excellent strategies which can wipe out vendor unsecured debt, and the surprise ending is the vendors will continue to do business with you despite the loss.
Call us for a discussion around this issue. Your problem may not be the bank. Of course, the best plans remove all debt, but we have options for a variety of financial conditions you may be facing.