Reuters reports that the number of small and mid-sized businesses who are suffering from a loan delinquency rose in the past six months in the midst of the current business loan credit crisis. According to a survey done by PayNet, small and medium-sized U.S. businesses seeking to finance in the form of business loan credit showed signs of trouble in November as loans more than six months past due rose for the 22nd consecutive month.
PayNet also found out that the loan delinquency will eventually be a cost that is going to be carried on to the lender. If the cost gets carried to the lender, then that leads to more of a squeeze on business loan credit in general.
If you are one of those small business owners who are having a hard time making payments on your small business loan, you do have options.
First, consider how your small business is structured. If you are in danger of loan delinquency, you need to ensure that your small business creditors can not pursue a legal action against yourself personally. If you have a sole proprietorship, you will be legally liable for all of your small business debts. Aquaint yourself with the debt consequences of your business structure.
Please note that you should keep track of taxes (especially taxes withheld from employees' paychecks) because you can be held personally liable for that even as a corporation or an LLC.
Second, make a list of your debts and your revenue flow. This will force you to keep track of where your money is going so that you can figure out how to cut your losses and pay back your debts.
Third, if you apply for a new loan, be honest about what you owe already. If you lie about your previous debts, you could be personally liable for obtaining a loan by fraud.
Fourth, don't hide your personal assets if you get into financial trouble. Creditors are used to evasive tactics and it could open you to civil and criminal liabilities of fraud.
Fifth, don't keep your bank account where you took our your small business loan. This gives the lender the right to take your money without prior notice if you fall behind on loan payments
Lastly, you could consider selling your small business or even bankruptcy. If you are in a bind, think about consulting a bankruptcy attorney in order to know your options.
- Tips for Financially Troubled Businesses (Findlaw)
- When You Can't Pay Your Business Debts: Personal Liability and Bankruptcy Options (Findlaw)
- Small Business Bankruptcy Climbs 81% in June (Findlaw's Free Enterprise)
- Business Entities: Formation and Maintenance (provided by Weinstein, Kaplan & Cohen, P.C.)
- Commercial Bankruptcy (provided by Kingcade & Garcia)