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How to Choose the Best Business Debt Settlement Company

February 24, 20249 min read

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How to Choose the Best Business Debt Settlement Company

Introduction

Settling business debt can be a daunting process. Many companies struggle under the weight of debts and loans, unsure where to turn for help. Debt settlement companies aim to negotiate with your creditors and settle accounts for less than what you owe – but not all settlement companies operate the same.

Choosing the right business debt settlement company is crucial. A reputable company can secure excellent settlement deals and drastically reduce or eliminate your debts. However, disreputable companies employ predatory tactics that leave you worse off.

This guide covers tips for choosing the best business debt settlement company for your situation. We’ll discuss warning signs of “debt relief” scams, questions to ask potential settlement companies, expected fees and savings, and what to expect throughout the settlement process.

Know the Warning Signs of “Debt Relief” Scams

Many so-called debt relief companies are little more than scams. They promise extravagant savings in exchange for large upfront fees – then fail to deliver.

Be wary of business debt settlement companies that:

  • Guarantee they can eliminate all or most of your debt
  • Require substantial upfront fees before settling any accounts
  • Tell you to stop communicating with creditors
  • Promise to “repair” your credit score
  • Refuse to detail specifics of their process in writing

Reputable settlement companies will never guarantee a specific percentage of savings upfront. Most charge fees as a percentage of enrolled debt as accounts get settled. They’ll be upfront about their practices instead of making sweeping promises.

Understanding Debt Settlement Fees

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Legitimate debt settlement companies charge two types of fees:

  1. Enrollment fees – Charged as a percentage of total enrolled debt. This covers the administrative work of setting up accounts.
  2. Settlement fees – Charged as a percentage of each account balance at settlement. This compensates the company for negotiating savings.

Typical enrollment fees range from 3-5% of total debt enrolled in the program. Settlement fees often scale from 15% to 25% of the settled balance.

For example: You enroll $100,000 of business debt into a program with a 4% enrollment fee and tiered settlement percentages. The company would charge $4,000 upfront. If they settle an account with a $20,000 balance for 50% savings, their fee would be 20% of the $10,000 settlement amount (20% of $10,000 = $2,000). The total fees would be $4,000 + $2,000 = $6,000.

Reputable companies cap total fees once they hit a percentage of enrolled debt – often between 15% and 25%. This aligns incentives and ensures companies only earn if you achieve savings.

What to Expect from the Debt Settlement Process

The debt settlement process involves:

  1. Analysis of Accounts – The settlement company reviews all your unsecured debts eligible for inclusion and analyzes them to identify the best approach.
  2. Establishing Reserves – The company helps you establish a dedicated reserve account and determine a monthly contribution amount to save for settlements.
  3. Negotiations – Once sufficient reserves accumulate in an account, the company contacts the creditor and negotiates a reduced lump sum settlement.
  4. Settlement & Repeat – If negotiations succeed, you authorize the payment and the account gets settled. The company repeats the process for remaining debts until all eligible accounts reach settlement.

A simple business debt scenario often takes around 24 months to complete. Complex situations with tax debts or business loans may take several years. Understand this going in – debt settlement provides major savings but requires patience.

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Questions to Ask Potential Settlement Companies

Choose settlement companies carefully by asking questions like:

  • What types of debt do you specialize in settling?
  • What credentials do your negotiators hold?
  • What involvement or guidance will you provide throughout the process?
  • Do you charge an initial consultation or setup fee?
  • What are your total fees both upfront and at settlement?
  • Can you provide references from past business clients?
  • How do you support customers struggling to maintain settlement reserves?
  • What strategies do you use negotiating business debt settlements?
  • How much business debt have you settled to date? What is your average settlement percentage?
  • Can you share online reviews, ratings, or testimonials from past clients?

While these questions provide a strong starting point, they only scratch the surface of due diligence required when choosing settlement companies. Take time researching options before deciding – the extra effort saves thousands in the long run.

What to Expect from a Reputable Settlement Company

Reputable settlement companies help in ways beyond just negotiating discount lump sums. Expect full-service, boutique treatment from beginning to end.

Here is what happens when partnering with a great settlement firm:

  • Initial Consultation
  • Customized Debt Analysis
  • Ongoing Support
  • Reserve Account Setup
  • Proactive Negotiations
  • Resolution Follow-Up
  • Credit Guidance
  • Tax Analysis

Settling directly provides none of these protections or conveniences. The minimal extra cost brings tremendous value over DIY attempts – especially for larger business debts.

Beware Debt Settlement Myths

Various myths and misconceptions surround debt settlement. Let’s clarify some common ones:

  • Myth: Settlement hurts credit scores more than direct payments
  • Fact: Defaulting directly tanks scores worse than settlements which mark accounts “Paid/Settled”. Either path temporarily damages credit – but settlements resolve debts faster. Plus, reputable companies provide guidance for score recovery.
  • Myth: Banks refuse to negotiate business debts
  • Fact: Banks generally prefer lump sum settlements to lengthy payment plans or defaults. Settlements provide quick closure allowing them to remove non-performing receivables from books. Master negotiators utilize this to secure excellent deals.
  • Myth: Debt settlement leaves people vulnerable to lawsuits
  • Fact: Creditors rarely sue to recover deficiencies from settled accounts in good faith. Settlement agreements include verbiage protecting you from subsequent collection attempts. If creditors do sue, reputable companies provide legal resources defending you.
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Ignore scare tactics pushing direct payments over settlement. When performed correctly, reputable debt settlement companies enable resolving business debts faster and at substantial discounts compared to other options.

Finding the Best Business Debt Settlement Company for You

As the above illustrates, business debt settlement facilitates eliminating large sums owed but requires trusting the right company to produce optimal outcomes.

Arm yourself with information before deciding on a settlement firm. Vet multiple providers thoroughly, assess experience levels and past results, get fee specifics in writing, and verify credentials.

Most importantly – listen to your intuition. If a company seems evasive answering questions or makes claims seeming too good to be true – they likely are. Dig deeper until finding a settlement company instilling complete confidence they’ll handle your accounts fairly and professionally.

The few hours spent properly vetting translate into tens of thousands in savings and peace of mind that your business receives the support needed rebuilding financial health.

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