An ultimate guide to recover from business credit card debt

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AN ULTIMATE GUIDE TO RECOVER FROM BUSINESS
CREDIT CARD DEBT
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CREDIT CARD DEBT
Business credit cards are among the best
financing options for small businesses. For
startups, a business credit card is the financing
lifeline that also helps build business credit.
Furthermore, even if your business is qualify for
a business loan later on a business credit card
can also be used for routine purchases. The word
of caution, irresponsible faster spending than
you can pay could results in pile of business
credit card debt for your small business.
You are not the only who needs a lifeline for
overspending. Many small business owners also
require understanding of how to recover from
business credit card debt. According to a survey,
business owners owed around 50 billion of
outstanding credit card debt in March 2018 and
this spending is projected to grow almost 200
billion along with the debt in the coming years.
Instead of getting anxious about the pile of
money you owe, start following best practices to
repay the debt to work with a fresh start. We
have listed top tips and advice to recover from
business credit card debt plus you can rebuild
your credit to move forward.
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A business credit card is an ideal financing
option for startups and established businesses
since it doesnt require a certain amount of time
and revenue to qualify. According to the US Small
Business Administration (SBA) in 2017, almost 12
of startups use business credit cards to operate
successfully. The only thing banks consider
when approving credit cards is the personal
credit score of the borrowers. If youre
responsible with your personal debt, youre
considered lower risk by the lender and can
easily secure a business credit card.
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The credit card companies are focus on
extenuating their risk, and they require some
kind of assurance that theyll not lose their
money. They want to add personal liability
clauses in the agreementand they impose on every
business type, whether its a sole
proprietorship, partnership, S-corp or C-corp.
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Such personal liability clauses surpasses any
legal shields that your business affords. For
example, while your LLC or LLP business is
protected from corporate lawsuits, youre
personally liable with personal liability clauses
legally.
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What Happens When the Business Bankrupts
Even if your business goes down, youre
unfortunately still personally liable to pay the
debt. This is why it is important to understand
and choose the right approach to recover from
business credit card debt. Even with your name on
the business card, lenders will be on you
personally. On the contrary, if you have a
business credit card without any personal
guarantee, which is very rare, the business debt
liability will based on how your small business
is standardized.
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There a bright side of this the lenders cant
just knock on your doors unannounced to collect
the debt from you personally. In order to collect
an unsecured credit card debt, they have to file
a suit and get a judgment against you.
This collection process takes time and money,
which is why lenders might be willing to work
with you to offset the balance or create a
payment plan that suits your cash flow.
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To recover from a credit card debt, you need
proper planning and execution. To help you get
out of the debt, here is a checklist to pay off
your debt and leave the financial burden behind
Refinance your business credit card debt.
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Pay your high-interest debts first.
Negotiate with your credit card company.
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Resolve your credit card debt.
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File for bankruptcy.
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Save money by cutting operating costs.
Get a loan to consolidate your credit card debt.
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Rebuild your business credit
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The first step towards recovering from credit
card debt is to start paying it before it gets
overdue. If youre unable to repay it on time,
thatll not only hurt your credit score, but also
make your financial condition worse. If you have
multiple credit card bills due, focus on paying
off first that cost you more including your
outstanding balance and its APR. Instead of
paying a little money to each balance, pay your
high cost balance in full or paying nothing at
all, definitely.
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Negotiate with your Credit Card Company
The second way is to negotiate with your credit
card company, though its not the best solution
but an easy step towards recovering from business
credit card debt.
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Discuss with your credit card issuer for some
easy affordable payment plans. They might be
willing to offer you lower interest rates,
scheduling repayment dates, or can even settle on
the amount you owe. But this is best suited for
those with a good past track record. Based on
your outstanding debts and the payments history,
there is a chance to make some progress than you
presume.
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Save Money by Cutting Operating Costs
Saving money by cutting your operational costs
can also help in debt reduction. Start by
answering questions like why are you spending
money, and what are you spending it on will help
manage your operational costs. Get your business
evaluation closely and quantitatively from an
accountant, or an independent consultant. Examine
your variable costs if you need a place to start
on your own. There is a change you might be
unable to reduce your costs of operation, for
instance, but you can work out the non-fixed
expenses, which ultimately help free up the cash
you need to pay your credit card debt.
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Get a Loan to Consolidate your Credit Card Debt 
Getting a debt consolidation loan can also help
you recover from the business credit card debt.
You can work with a lender to secure a small
business loan to pay off your credit card debt.
Term loans and SBA loans are among the best
options to recover form a credit card debt. These
loan types offer shorter monthly payments and
longer payment cycles. You will receive a lump
sum amount of money to pay off your debt directly
without accruing more interest every month. The
only drawback of consolidation loans is that, you
need to have a good credit score to qualify.
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Refinancing your debt can help If youve debt on
multiple credit cards. Managing multiple payments
on monthly basis can be hard, and if you miss
one, it can put you on a road to more overdue
payments. Your debt starts to stack across all
cards, plus interest.
Check your eligibility and refinance your
business credit card debt with a balance transfer
to a 0 introductory APR business credit card
lower. These types of credit cards offers
extended periods with no-fee balance transfers to
pay off your debt free of more interest. Your
balance will be lower when the 0 interest period
is over. Refinancing is a good option if youre
not eligible to apply for a small business loan.
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If you can negotiate balances on your outstanding
personal debts, you can also settle your business
debts, because both are the same thing. By
working with your business credit card companies
or banks, you can settle your credit card debt.
The creditors arent trying to get a judgement
against you in the first place, since they want
to collect as much of their outstanding balance
as possible. Hence, there is a possibility you
might end with up with a settlement on paying off
a portion of your debt. Once a settlement is
done, youll have to pay upfront so make sure
youve cash to settle the amount. This way, you
will not still be accumulating debt with late
payments and itll be affordable than your
outstanding debt. Instead of filing for
bankruptcy, getting a settlement is a better
alternative. While pursuing settlement, its
advisable to approach directly to your credit
card issuer in order to avoid a business loan
scam.
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It should be your last option. If youre
exhausted and out of options to recover from your
business credit card debt, its time to file for
bankruptcy and to do that, you should know whats
required for filing. Chapter 11 Business
Bankruptcy process allows you to declare
bankruptcy but by submitting a reorganization
plan in bankruptcy court, since the process
restructures the business to be more competent
and to be able to pay off the creditors. Here,
youll get legal protection and time to create
your plan along with the opportunity to recover
and keep operational. Filing for bankruptcy is
not sensible since the decision will stay on your
credit report for up to a decade. You can also
file for Chapter 7 personal bankruptcy If you
cant pay your debt, and is entirely liquidated,
and it has become your personal debts. You can
have your business credit card debts relieved
with Chapter 7 personal bankruptcy, once your
case is settled. But remember, a personal
bankruptcy will stay on your personal credit
history. So, think TWICE before making your move!
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Around one third of small business owner use
credit cards and if youre among the list, focus
on rebuilding your business credit. Once youre
able to rebuild it, creditors can trust you with
debt again. Rebuilding credit doesnt just
happen overnight and it also influence your
capability to qualify for good business credit
cards in the futureyoull need solid credit
score to qualify for small business loans. Plus,
the healthier your credit score will be, the
better loan terms you can avail with
lenders. The first step towards rebuilding your
credit is to apply for a secured credit card. A
secured credit card offers a security deposit for
your credit line, and if you dont pay back, the
card issuer will keep the deposit. Once you start
making consistent payments, youll see
improvements in your credit score recovery.
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The Conclusion
Working towards recovering from business credit
card debt might looks difficult in start but its
worth the effort. Recovering debt, regaining
creditors trust, and eventually rebuilding your
credit score will help to be on the road to
success so you dont have to incur business
credit card debt again.
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