Unable to Pay a Business Loan? Here are Your Options

Being unable to repay a loan is not unheard of. Even in the business world, it indeed does happen and oftentimes, the outcome can be quite devastating, while in some cases, it may not be that way. Many factors add up and influence what unpaid business loans lead to, and what options are available in such a situation. Your business type and the type of loan your business has taken are two primary factors that control this.

Typically, your business type determines the extent of liability and whether or not a part or whole of the liability shall be personal, ultimately, it is the type of loan you take, that shall determine what options you shall have available to you.

Unable to Pay a Business Loans

1. Non-Repayment of Secured Loans

Secured loans typically are settled by claiming ownership of the security that’s used as collateral against which such a loan is issued.

In some cases, a compromise can be discussed and mutually agreed to, between the lender and the borrowing business. The best way to handle a non-repayment of a secured loan is hence to communicate well with your lender after refreshing your understanding of the loan agreement and carefully examining and understanding your loan terms.

2. Non-Repayment of SBA Secured Loans

Typically, a portion of your loan shall be guaranteed by SBA and the remaining against a valuated collateral. In most cases, the collection process shall include taking possession of the collateral. Thereafter, a claim is filed with SBA that pays the lender the amount. This debt is hence now transferred to SBA. The SBA shall request for the payment to be done to cover their expenses. Should you be unable to cover the expenses, a compromise offer from your end may be accepted.

However, if a resolution can’t be found, the SBA shall submit your account to collections officials at the Treasury Department. The Treasury Department has the authority to take various actions to get the money they are owed, which may include wage garnishing, personal asset cease, etc.

3. Non-Repayment of Unsecured Loans

Such loans are typically high-risk loans and lenders offering these loans compensate for the lack of collateral, by offering lower dollar amounts, higher interest rates, and shorter repayment terms. A personal guarantee is associated with the loan for processing it. While this isn’t technically collateral, there’s a similar impact if you default on an unsecured loan. The lender would come after your assets and/or finances to recoup the money involved with the financing.

In many cases, compromises in repayment amounts and relaxation of liability are seen to be the outcome. Communicating closely and well in time with a lender often impacts the decisions related to such issues.

Other Issues Related to Defaulting a Business Loan

When you skip a single payment of a loan, it shall impact your business credit scores, and depending upon the setup of your business, it may also impact your personal credit scores. However, non-repayment or defaulting business loans have many far-reaching impacts that may include:

  1. A substantial impact on your business credit scores
  2. A substantial impact on your personal credit scores depending upon the setup of your business
  3. Various issues linked to a bad credit performance, e.g. difficulty getting good deals on loans, ideal rental options, etc.
  4. Legal consequences of defaulting the loan
  5. Added liability due to additional charges of defaulting the loan (as applicable).

Get a Flexible Business Loan from Business Advance Funding

One of the qualities of an unsecured loan that makes it friendly is flexibility. At Business Advance Funding, we provide business loans which (subject to eligibility and further terms) offer you the flexibility through:

  • Early loan closures without penalty
  • Extension of loan tenures and payments upon request
  • Changes to loan payment plan upon request

Your business can get a loan from us easily, through our online application system. Simply apply and we shall guide you with the further steps and requirements.

Disclaimer: This article is aimed at providing insight and ideas that are general in nature to most loans of whatever type are described. It does not guarantee the availability of any option in your particular loan deal/agreement/contract with your lender. The terms and conditions applicable to any business loan you may have received may or may not feature such options or features as described in this article.