Defaulting on a loan Will never be a Good idea, specially being financing the best business allied. We understand that business owners could find themselves on a tight situation but there’s always a way out.
This Is What We Recommend To Avoid Defaulting On A Loan:
- Cut expenses to help the business cash Flow. Well’s Fargo shared eight tips to help manage your business cash Flow.
- Set flash offers or promotions that Will attract more client to your business (Sometimes we need to sacrify some profit points to cover the business needs).
- If none of the above are posible, you should try to find a reverse consolidation which Will reduce your payment amount.
Consequences of Defaulting on a Business Loan
According to Forbes Varied scenarios including a drop in sales, overspending and miscalculations can all lead to businesses defaulting i.e., being unable to repay debts including the interest or principal on a loan. Defaults occur when borrowers are unable to stand by their debt obligations and either stop making recurring payments, skip payments or stop making any payments altogether.
The consequences incurred for defaulting on a business loan depend on whether they were secured or unsecured.
When Secured Loans Are Defaulted: In the case of the secured loans, foreclosures allow lenders the right to gain control of assets provided as collateral under the loan agreement. This collateral is often auctioned in order to account for the lender’s losses.
When Unsecured Loans Are Defaulted: In the event that an unsecured loan was defaulted, business owners are charged with a late fee. Lenders may also require personal guarantees or may gain control of a business’s assets. Failure to comply with these requests can result in lenders filing lawsuits against businesses that default. The court then determines how the loan is to be recovered. In the event that the loan continues to remain unpaid, the business in question may have to file for bankruptcy.
Repercussions of defaulting business loans are visible in credit scores. Lenders report failure to pay loan instalments to credit agencies each time business owners are found lacking. This can lead to a drop in credit scores, which in turn can imperil the possibility of future loans being approved.
Inverse to a plummeting credit score is a consequent soaring interest rate based on the stipulated business loan agreement. If the interest rate remains the same, borrowers are subject to exorbitantly priced late fees. This directly affects a borrower’s existing loan repayment and also contributes to their ability to avail of loans in the future.
What is a Reverse Consolidation?
A reverse consolidation is a type of MCA or loan that lenders claim can help a business that has stacked a number of merchant cash advances. When a business owner gets a reverse consolidation, the reverse consolidation funder will provide the business owner with a new MCA (Position) or loan, to help them with their daily or weekly MCA payments.
Typically, the MCA or loan provided by a reverse consolidation lender is for a large amount and is advanced in increments over a longer period of time than the business’s current MCA or positions repayment schedule. This means the business will receive a cash advance on a weekly basis in excess of what is due to their current MCA lenders.
It’s important to understand that a reverse consolidation doesn’t reduce the amount a business owes, or consolidate your outstanding MCAs. A reverse consolidation can help make the daily or weekly repayment schedule more affordable in the short term, but in essence, add another MCA Position to your business’s plate, with a longer payment period than most short-term MCAs
Can I get funded after defaulting on an unsecure loan?
Although it’s harder to get approved after failling on an unsecure loan here at Mainroad Capital we can help, however there are some point that you need to consider.
- The cost of the money Will be higher since the risk is also bigger.
- The term Will also be shorter as the you need to build a Good payment history.
- The approved funding amount Will also be affected.
What’s an unsecure loan:
Unsecure loans are those where no colateral is requested to get funded, non of your assets are at risk with this type of products. Here some unsecure loan types: Credit Cards, Business Loans, Business Lines of Credit, Student Loans and more.
Are unsecure loans more expensive?
Unsecure loans tend to be more expensive than collaterized loans since the risk is higher.
Mainroad Capital is very aggresive at helping those who for some fair reason failed to comply with a loan, we can help you recover your business credit reputation by providing a starter offer, complete our funding application and send us your last 3 months bank statements to start the funding process.
Disclaimer: The content of this post has been prepared for informational purposes only. Consult with your tax, legal, and accounting advisor before engaging in any transaction.
