Repairing Credit Problems

Once a negative item is reported to your business credit report, it has an immediate impact on your company’s business credit profile. This will become a serious warning for anyone who requests a copy of your business credit report and may cause some companies to refuse to do business with you.

A negative business credit report can make it very difficult to qualify for additional credit. If you do find a lender who is willing to do business with you, the increased interest rates and fees associated with the loan will make the cost of borrowing money much greater. You may even have difficulty obtaining insurance if your credit problems are serious enough.

The good news is that if you are committed to staying in business, there are steps you can take to turn your credit around. However, there is no instant solution. Often times it takes just as long, if not longer, to re-establish a positive credit rating than it did to establish one in the first place. Another misconception about credit repair is that you can pay someone else to either repair or re-establish your business credit profile. The reality is that you need to be prepared to spend quite a bit of time and your own efforts to repair your damaged business credit profile.

Resolving Financial Problems

As soon as you have re-established your company's finances, you can begin to re-establish your business credit rating. You efforts to repair your business credit should be divided in two ways: taking care of the debt that you have already accumulated and implementing smart business practices so that you can avoid similar financial difficulties in the future.

Negotiating Through a Business Debt Consultant

If you are trying to avoid declaring bankruptcy but have significantly delinquent outstanding debt, you should consider enrolling in a business debt consolidation program. Similar to consumer credit consolidation programs, the focus of these types of business credit consolidation programs is to negotiate with your business creditors in order to get you reduced interest rates and payments over extended periods of time. However, while these types of programs enable a company to re-establish a positive payment history with its creditors once the terms have been renegotiated and an agreement has been reached, they do not provide a quick fix, pay off your debt, or remove any previously reported negative information from your credit report. But if the alternatives are going out of business or declaring bankruptcy, a business credit consolidation program may be a far better option for your company.

When dealing with a business credit consolidation company (also known as debt-restructuring company) the first step is to provide them with all the information about your current outstanding debt. Once your creditors have verified this information, your debt consultant will create a budget that takes into consideration what you can comfortably pay each month. Then you begin to make monthly payments to the debt consolidation company, and they, in turn, make payments to your creditors.

You also can decide which of your creditors you want to include in your debt-restructuring. For example, if you have a critical supplier that you can afford to pay in full when that amount is due, you should keep them out of your debt consolidation plan.

Even though many consumer credit consolidation companies have popped up over the past few years, there remain only a few business consolidation firms nationwide. The largest is Corporate Turnaround (www.corporateturnaround.com). The cost of the service is included in the payments you make as part of the plan, so you ultimately pay back less than you would have if you would have continued making payments on your own and eventually paid your account in full.

The U.S. Department of Agriculture provides advice and credit counseling for ranchers and farmers at www.fsa.usda.gov/pas. If you search for "credit counseling" on their website, you will be directed to local agency offices.

There are many benefits to working with a business credit consolidation consultant including:

• Communicating with Your Creditors on Your Behalf: Once you sign a contract with your credit consolidation company, you authorized the firm to deal with your creditors on your behalf. As a result, they can communicate directly with your lenders, collection agencies, or any attorneys who may have interest in your accounts. This can reduce your stress significantly, leaving you more time and energy to focus on running your business.
• Avoiding Excessive Legal Fees and Bankruptcy: By working with a debt consolidation company, costly legal fees can be avoided. And as long as sincere efforts are being made to make payments to your creditors, they will be willing to work with you in order to help you avoid bankruptcy.
• Beginning to Repair Your Business Credit Profile: By making the payments on time that you have negotiated with your debt consolidation consultant, you begin to have a positive impact on your business credit report.