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How Long Does Business Debt Settlement Take to Complete?

February 24, 20248 min read


If you run a small business that’s struggling with debt, you may be wondering how long it takes to complete a business debt settlement program. At Delancey Street, our business debt settlement process typically takes around 12-48 months depending on the specifics of your situation.

An Overview of Business Debt Settlement

Business debt settlement, also known as business debt negotiation, is when a company works with a settlement firm to negotiate down its unsecured debts. The goal is to pay back less than the full amount owed and receive a lump sum payoff amount that settles the debt.Some key things to know:

  • Business debt settlement only applies to unsecured debts like credit cards, vendor accounts, lines of credit, etc. It does not apply to secured debts like mortgages or auto loans.
  • When you enter a debt settlement program, you stop making payments on the debts being negotiated and instead make monthly payments into a dedicated account.
  • The settlement company then works on your behalf to negotiate lump sum settlements with your creditors, typically for 30-60% of what you originally owed.
  • The process relies on the concept that creditors would rather get a portion of what they are owed than risk getting nothing if the business defaults completely.
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What Impacts the Business Debt Settlement Timeline?

There are several key factors that influence how long it takes to settle business debts, including:

1. Total Debt Amount Owed

The total dollar value of your outstanding business debts impacts the timeline. Settling a few small debts of $5,000 – $10,000 each may only take 6-12 months. But for businesses with total debts in the six figures range, it typically takes 12-48 months depending on the negotiation process.

2. Number of Creditors

The more individual creditors you have, the longer the process since separate settlements have to be negotiated with each one. Settling debts with just 1-3 creditors is faster than settling 10 or more accounts.

3. Type of Debts

Certain types of business debt tend to settle more quickly than others. Credit card debt usually settles faster than something like a line of credit or vendor debt. The type of creditor also matters – large banks tend to take longer than small suppliers.

4. Age/Status of Debts

Newer debts that are still in good standing settle faster than older debts that may have already been sent to collections. Creditors are more motivated to settle newer debts.

5. State Laws

The state you operate in impacts timelines too. Some states have laws regulating debt settlement practices more strictly than others. This can constrain settlement options in impacted states.

Walkthrough of the Business Debt Settlement Process

To give you a better idea of why business debt settlement takes 12-48 months, let’s walk through what the process entails:

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1. Client Onboarding (1-2 Months)

This includes the initial consultation, gathering documentation about your debts, setting up your dedicated account, explaining the program guidelines, securing signed agreements, etc.

2. Ramp Up Settlement Account (2-12 Months)

You stop paying your creditors and instead make monthly payments into your settlement account. Enough of a lump sum must accumulate to start settlement negotiations. Timeline varies based on total debts.

3. Initiate Settlement Negotiations (6-12 Months)

Once the account reaches critical mass, your representative starts contacting creditors to initiate settlement talks. Multiple rounds of offers/counteroffers happen over several months.

4. Secure & Finalize Settlements (12-36 Months)

As creditor by creditor agrees to settle, the associated lump sum payments are made from your dedicated account. Any final paperwork gets signed.As you can see, even a relatively smooth business debt settlement scenario takes 12+ months when you tally up the onboarding, account funding, active negotiations, and finalizing of settlements.And that’s for just 1-3 creditors. For larger business debts with 10+ accounts, the timeline easily extends to 24-48 months to work through all the individual settlements.

Strategies for Speeding Up Business Debt Settlement

If your business is straining under high debt payments and you want to settle your balances faster, here are some tips:

  • Prioritize Accounts – Discuss with your representative which debts to tackle first. Settling a few small balances quickly can free up cash flow.
  • Gather Documentation – Have details like past statements and terms & conditions handy. This helps skip data gathering delays.
  • Secure Tax Settlements – If you owe back taxes, include the IRS and state tax commission as priority creditors. Resolving tax debt is critical.
  • Make Consistent Payments – Putting regular monthly deposits into your settlement account makes a big difference. Inconsistent funding slows things down.
  • Remain Proactive – Check in regularly with your representative and promptly provide any additional documentation needed to keep the process moving.
  • Consider Debt Consolidation First – If total debts are lower (e.g. under $100k), debt consolidation may allow faster payoff than debt settlement.
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The Benefits Are Worth the Timeline

While 12-48 months may seem long compared to other debt relief solutions, business debt settlement has distinct advantages that make it worthwhile for many small business owners, including:

  • No Tax Consequences – Settled debt is not counted as taxable canceled debt income, unlike forgiveness solutions like bankruptcy or debt consolidation loans.
  • No Collateral Required – Eligibility is based on total debt and income metrics, not any business assets that may be tied up as collateral elsewhere.
  • Paybacks Tied to Performance – Monthly deposits are affordable percentage-of-income payments tied to your business’s cash flow each month.
  • Interest & Fees Terminated – Once in the program, interest and fees stop accumulating on debts being settled. This can save tens of thousands long term.

For businesses overloaded with high-interest debt payments that are crushing cash flow and profitability month after month, 12-48 months to be free of that burden can be well worth the wait.

Let Delancey Street Help With Your Business Debt Settlement

If you have additional questions about the expected timeline or would like to discuss initiating a business debt settlement program for your company’s situation, please contact us today at 212-210-1851 to speak with one of our dedicated debt experts. Our attorneys and financial professionals can provide a free consultation, explain the process, and assess the viability of debt settlement for your small business debts


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