4 Steps to Debt Restructuring

4 Steps to Debt Restructuring

Restructuring can be the answer to managing small business debt.

By Marcia Smith

As a small business owner, you’re bound to face a few struggles, and a familiar problem among SMEs is debt.

Some of the best businesses suffer at the hands of debt, but there are ways of managing it. Here are some of the key steps you need to take when debt restructuring for a small business:

Step 1 – Pinpoint the problem

Common issues include low sales, relative to cost, undercapitalisation, straying away from a financial plan, or high overheads. Identifying this can help save money in the future.

Step 2 – Hardship letter

A creditor may require this alongside some kind of agreement for paying them back. It’s important to be open, honest and personable, along with providing evidence if required.

Step 3 – Planning a budget

Planning a monthly budget of what can realistically be paid back is essential. If you can only manage to pay back under 10% of the debt, there’s always the option of seeking professional help. In any case, if you are not financially minded it would be helpful at this point to seek the advice of your accountant or Independent Financial Advisor.

Step 4 – Consider a debt restructuring firm

If this all seems overwhelming, and the debt feels unmanageable, hiring a professional may be a suitable option. After providing certain information, a firm should create an in-depth plan based on the debtor’s budget and creditor’s cooperation.