How to Negotiate With Creditors for Small Business Owners
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How to Negotiate With Creditors for Small Business Owners

While the economy recovers from COVID-19, some business owners are struggling to make debt payments on time. Here’s how to negotiate with creditors.

Negotiate With Creditors

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.


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.

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