Factoring Saves Smes Who Miss Loan Payments
What happens if a small business owner misses or fails to pay a small business loan
? The answer isn't pretty, and in fact, the small business owner could be sued by the bank that gave him the loan if he does not pay - even if the business goes bankrupt. How can this happen?
Banks will usually sue a small business in order to recoup lost loan amounts, especially when it helps them with equity. If the bank sues immediately, it shows that they are also trying to get ahead in the creditor line in case of bankruptcy proceedings.The next big question -- what happens when you are late with your loan payment -- say for 30 days? The answer depends on the source and terms of your loan. Many lenders wish to stop the rising small business default rates. In fact, the U.S. Small Business Association (SBA) had a default small business loan rate of almost 15 percent of its outstanding loan guarantees by the middle of 2010. This means if you have a loan backed by the SBA, your lender might seek the guaranteed part of the loan, because of concerns about increasing default rates.
The most important thing to remember is if you have a guaranteed loan, then you are 100 percent obligated to pay it back, meaning that you'll need to develop a financial plan if you foresee not able to pay back the loan. Try to develop a plan that is based on financing and cost-savings options before speaking to a lender, such as factoring. If you have a business that has accounts receivables, you could be sitting on your next loan payment! Factoring is an option for to increase the cash flow of your business today. Also keep in mind that the bank will be forced to sue if you don't eventually make payment arrangements to pay back the loan.
Most lenders would prefer to take a settlement or even renegotiate the loan. Keep your promises, and if you cannot, contact the bank early and tell them you are in the process of looking into invoice factoring to vash in early on some of your company's invoices from customers for the loan payment. The last thing you want to consider is bankruptcy to deal with your small business failure. So in lieu of this tactic, consider accounts receivable factoring, because it just well may be the only way to save your business fairly quickly, and then you can properly restructure your debt payments after you are current.
by: Kristin Gabriel
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