While the economy recovers from the COVID-19 shutdown, you might struggle to pay back debts that your small business owes. Don’t despair! Tough times call for resourceful problem solving, especially once you know how to negotiate with creditors. When negotiating how you are going to pay back debt, whether it’s a loan or a large purchase for your small business, it’s conceivable to get more favorable terms by finding a creative solution with your creditors. Don’t be afraid to ask for a more flexible payment schedule or make partial payments, especially during times that are universally difficult, like a global pandemic. If you’re wondering how to negotiate with creditors, read on for effective negotiating tips.

1. Deal With Your Debt Quickly

If you find yourself struggling to pay off debt and it’s threatening the financial health of your business, don’t wait until you miss a payment. Getting into arrears with debt is a bad idea. Not only can the debt snowball and cause you undue stress to know the future of your business hangs in the balance, but it can also hurt your business’s credit score—negatively impacting your ability to get low-interest rates and loans—which can then needlessly compound your business’s financial woes. Missed payments can stay on your credit report for seven years!

Put in a call to negotiate more favorable terms with your creditor before you miss payments and the debt gets sent to a collection agency. Not only is it infinitely more stressful to be hounded by professional debt collectors, but it can also do much greater damage to your credit history and credit scores. Plus, when you owe a creditor, it’s in their best interest to negotiate with you, as the creditor will lose the ability to collect much of the amount owed once it’s sent to a collector.

2. Establish Your Pay-Back Budget

If possible, before speaking to someone, you want to establish an idea of what terms you would like to agree upon. Carefully assess your income and outgoing expenses, your assets, and how much you can afford to pay.

If you can pay a lump sum upfront, you are more likely to be able to negotiate better terms, like a lower total payment. If you negotiate a way to comfortably continue to make monthly payments, you might be better off using a lump sum to invest in your business instead. If you agree to settle a debt by paying an amount that’s lower than you originally owed, it can damage your credit score. Even with that, depending on your circumstances, you might decide it’s the best course of action.

If you decide a payment plan is the way to go instead, get in writing the total amount you will have paid by the time you pay the complete debt. You want to be able to determine the APR you will be paying.

3. Be Respectful

When trying to re-negotiate debt payback terms, remember that you are basically asking someone a favor. A creditor probably won’t do you any favors if you are rude, angry, or lashing out. Asking nicely is much more likely to get you an agreeable response, rather than being demanding or bullying someone into better payment terms.

Once in a conversation, if you find yourself losing your cool and you’re unable to regain your composure, you might decide to excuse yourself from the call until you can calm down. It will help you to make a better case for yourself and smarter decisions to be calm rather than upset or angry.

4. Truthfully Describe Your Circumstances

When negotiating terms, explain why you are having trouble paying back the debt, whether it’s due to COVID-19 business shutdowns, an unexpected expense, or an income change like a layoff in the family. You should also explain the efforts you are taking to right your financial situation, such as cutting expenses, diversifying how you make money, applying for government support, or consolidating debt.

Keep your story truthful, specific, brief, and to the point so that your creditor understands where you are coming from. You don’t want them to think you are simply trying to dodge paying the full amount on time without good reason. Plus, if they understand your circumstances clearly, it can help them to work together with you to solve the problem. If you are on the same team, it’s easier to come to a mutually agreeable resolution rather than treating each other like the opposition.

5. Ask Specific Questions

Ask thoughtful questions and carefully write down the answers. Each time you speak with someone, write down their name, the date and time, and as much detail as possible about the discussion.

If they threaten to sue, garnish your wages or assets, or confiscate property, do your best to remain calm. Depending on the circumstances, these actions might not be legal. Rather than reacting, start asking questions. You want to retain as much detail from the conversation as you can so you can properly research later whether what they are attempting is illegal. Asking questions and writing down the details can help you remain calm, keep your cool, and prevent you from saying something you might regret.

6. Consider Consolidating Your Debt

If you aren’t having any luck negotiating with your creditor yourself, or if you have multiple accounts that could fall into arrears, compounding your problems, you might consider consolidating your debt. There are a few options to consider such as a low- or zero-interest-rate credit card balance transfer, or a consolidation loan with a low-interest rate to pay off your other debts.

If you don’t find good options that you qualify for, you might try working with a credit counselor. A credit counselor can help consolidate your debt so that you are paying the credit counselor one monthly lump sum, which they will then divvy up and payout to all of your creditors. If you use a credit counselor, make sure the credit counseling agency is certified. This will help you avoid a scam or predatory lender.

Conclusion

No matter your reason for wanting to negotiate better payback terms with your creditors, it’s important to do your best to be a resourceful problem solver, optimistic, cooperative, and enthusiastic. While many people are going through difficult times, jobs are coming back and the economy remains buoyant. It’s highly possible that the tough times we are all going through will be a distant memory as the economy continues to rapidly improve and many small businesses recover.

 

Boston Beer Company’s Purchasing Manager Sandra Paterson, Buyer Jonathan Young, and Print Production Packaging Manager Doug Ramsay explain how to prevent interruptions in your small business supply chain due to lockdown rules and the COVID-19 shutdown. Here’s how to protect your business from COVID-19 disruptions.

How Small Businesses Can Prevent Supply Chain Disruption

Paterson recommends staying in close communication with your suppliers to ensure you stay informed of any supply shortages or potential interruptions to the supply chain. Paterson recommends setting up a weekly chat so you can ask for insight into any items you are looking to source from suppliers.

Paterson says to inquire about whether there could be potential shortages. She says to make sure your suppliers all have enough inventory in stock to keep you adequately supplied with whatever you need to keep your business and sales moving forward. That way, if there will be a shortage, Paterson says you can be given adequate notice so you can buy some inventory in advance to get you through. If you can’t afford to buy upfront, Paterson suggests perhaps arranging with your suppliers to set aside inventory so you can continue to purchase supplies as needed.

Paterson says to ask your supplier if they anticipate any problems in the future. She says to ask where they get the raw materials to manufacture what you need and to trace where things are coming from and what problems could be coming down the pike that could potentially interrupt the supply chain both short and long term.

Paterson says it’s a good idea to also keep a second supplier on backup in case your frontline supplier suffers a shortage that can’t be remedied in time to avoid a supply chain interruption. Paterson says that if you feel like “just a sale” to your supplier or if they aren’t communicative when trying to establish a relationship, versus a company that actually values you and your relationship, then don’t be afraid to use your secondary supplier.

What if Your Business Can’t Get Supplies?

Young notes that with shipping delays and other causes of supply chain interruptions, he says there are creative ways you can get restocked. Young notes that there are local sellers who have an excess of ingredients, and by purchasing ingredients locally, you’re supporting your local economy. He says if you can afford it, stock up on whatever you might need and load your business’s pantry.

Young says it’s important to be adaptable and creative when it comes to restocking inventory. He says to reach out to a neighbor or counterpart in the business so you can pool orders to hit minimums if necessary when bulk ordering. He also says to look for opportunities for new revenue streams. He gives the example of a barbershop that was shut down because they weren’t allowed to cut hair, and so they turned to selling t-shirts for a time to make money. He said Dogfish Head turned to manufacturing and selling hand sanitizer to the state of Delaware when there were shortages.

Creative Cost Cutting for Small Businesses

Young recommends looking for creative ways to cut costs. He says you can potentially limit costs by paring down the assortments and variety of products sold and instead of pushing products that are historically best sellers. That way you aren’t spending money on extra inventory that won’t necessarily sell as well.

Young says that cost variables can add up and impact your business if you aren’t careful. He says to run the numbers and factor inadequate padding to account for shipping, packaging, sourcing different ingredients, or other issues that might arise as a result of making changes to your business operations. Build out your margins and make sure you adapt to the current market. This might mean raising prices and passing extra costs along to the consumers.

Ramsay notes that for a business owner who would go from selling in an open market like a farmer’s market for example to trying to fulfill online orders due to the Coronavirus shutdown, there are some special considerations they might not be aware of. Ramsay says to make sure to add in enough time to ship the product and to pack it in such a way that the goods remain fresh and undamaged. He says if you decide to deliver or to encourage customers to pick up curbside, you can avoid paying for shipping.

Since shipping costs seem to be very high, and at times can be as much as the product you’re trying to sell, Young says to research alternative options for online shipping companies. You might be able to get cheaper shipping than UPS or the post office. ShipStation and Pirate Ship may be viable options for your business. Learn more about them and read reviews before choosing anyone to do business with.

Conclusion

Keep your business running smoothly throughout the pandemic. The Coronavirus doesn’t need to signal the end of your business, as long as you remain flexible and willing to adapt to the changing market. Stay proactive and ahead of interruptions to your small business supply chain, and cut costs wherever possible. Together, we will make it through the storm!

The event, open to all with a suggested donation, will also featured restaurant and catering entrepreneurs who are Accion Opportunity Fund clients. Donations raised during the online event will benefit small businesses nationwide through Accion Opportunity Fund’s Small Business Relief Fund.

The country’s 30 million small businesses are experiencing an existential crisis as they do their part to prevent the spread of COVID-19 by closing and honoring shelter-in-place orders. Half of small businesses have less than 15 days of cash buffer, as many as 44% of small businesses are having to close and experts expect that most restaurants will never reopen.

“This is going to be a very special night for a very important cause–helping our small businesses survive this once-in-century crisis. We have to decide what we want our Main Streets to look like when this is over, and we must act decisively to keep small businesses alive and ready to rebuild. This is a fun way to do something really important,” said Accion Opportunity Fund CEO Luz Urrutia.