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If you own or operate a small business, you likely understand the utility of business credit cards. However, as useful as they can be, business credit card debt can quickly become overwhelming if mismanaged. Here’s what every entrepreneur needs to know about settling business credit card debt.

The Causes and Consequences of Business Credit Card Debt

Business credit cards offer convenient access to capital when cash flow is tight. However, they also enable business owners to spend beyond their means, accruing dangerous levels of high-interest debt. Reasons businesses may over-leverage credit cards include:

  • Funding operating losses instead of right-sizing expenses
  • Financing capital investments rather than saving or seeking lower-cost financing
  • Subsidizing owners’ personal lifestyles

Unchecked, credit card debt can devastate a business. Interest charges siphon away profits needed for growth. Burdensome monthly payments strain cash flow, limiting flexibility. Ultimately, excessive credit card balances can force businesses into bankruptcy.

Should You Seek Business Credit Card Debt Settlement?

If your business is sinking under the weight of credit card debt, debt settlement may offer a lifeline. Delancey Street specializes in negotiating debt relief for small business owners. Our team of financial experts and attorneys, led by Steven Raiser, our Chief Legal Officer, leverage their decades of experience to secure win-win agreements with creditors.Debt settlement provides multiple benefits for cash-strapped business owners:

  • End collection calls and lawsuits – Creditors will deal directly with us instead, stopping harassment.
  • Lower balances – We negotiate discounts of 25% to 50% off what you owe.
  • Affordable payments – New monthly payments based on what you can realistically afford.
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Debt settlement allows you to resolve unmanageable credit card balances without closing up shop for good. It also helps you avoid bankruptcy, preserving your business credit rating and ability to access financing in the future.

Other Business Debt Relief Options

While settlement agreements can save businesses with out-of-control credit card balances, other options exist too. Which solution (or combination) works best depends on your specific situation:

  • Credit counseling – Non-profit services offer free consultations and personalized debt management plans. They also negotiate lower interest rates from card issuers.
  • Debt consolidation loans – Banks will refinance credit card debt into a single fixed-rate installment loan. This simplifies payments and often secures a lower interest rate.
  • Chapter 11 bankruptcy – Court-supervised reorganization erases some debts while allowing businesses to continue operating. However, it leaves significant legal bills and credit damage.

Most business owners see debt settlement or consolidation loans as better options than Chapter 11 bankruptcy. The former helps negotiate debt forgiveness without having to cease operations. The latter exchanges high-interest credit card balances for more manageable installment loan payments. Both allow you to retain control of your company.

Partner with a Reputable Settlement Firm

Attempting do-it-yourself settlement negotiations is not advisable. You need experienced professionals in your corner. Delancey Street’s team possesses the expertise to secure maximum debt relief from even the most stubborn creditors. Steven Raiser, our Chief Legal Officer, provides expert guidance informed by his background as an esteemed former prosecutor.To learn more about our business debt settlement services or schedule a free consultation, call 212-210-1851 today. Our dedicated advisors will assess your situation, answer all questions, and explain how we can help resolve your business credit card debt.

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Frequently Asked Questions About Business Credit Card Debt Settlement

Struggling with high-interest credit card debt? Unsure if settlement could work for your business? Here are answers to some commonly asked questions:

Will Settling Hurt My Business Credit Score?

Settling credit card debt for less than you owe always requires the card issuer to write off some portion of your balance as a loss. This typically results in them closing your account. The closure then gets reported to business credit bureaus.However, a settlement is still preferable to bankruptcy or allowing debts to spiral out of control. Plus, once you’ve established a positive payment history with your new consolidated loan or payment program, you can start rebuilding your business credit profile.

How Much Can I Get Forgiven?

In general, professional negotiators can secure 25% to 50% discounts off your balances. However, the relief amount depends on factors like:

  • Your recent payment history
  • Total debts versus assets
  • Ability to make lump-sum contributions

The more leverage your business has, the lower the settlement offers creditors will accept. Much also depends on the persistence and negotiation savvy of the firm you hire.

Can I Do It Myself?

Attempting self-guided settlement rarely succeeds. You lack the skills and emotional detachment needed to push for maximum savings. Creditors will exploit gaps in your financial literacy or legal knowledge.Working with seasoned professionals levels the playing field. Firms like Delancey Street possess extensive expertise negotiating win-win debt relief outcomes with major banks and creditors. We save business owners significant money compared to what they could achieve alone.

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How Long Does It Take?

In general, the process takes around 90 to 180 days from engagement to securing a negotiated settlement agreement. However, it can drag on longer depending on the creditor’s stance and responsiveness.The timeline also varies based on the complexity of your overall finances. Situations involving tax debts, lawsuits, or business partners can add delays. An experienced settlement company will advise you on what to expect for your specific scenario.

What Are the Tax Implications?

The IRS treats cancelled or forgiven debt as taxable income. However, the American Rescue Plan Act of 2021 created a temporary exception for business debt relief until 2025.Thanks to this provision, any settlement discounts or waived balances you secure until 2025 will not count as taxable cancellation of debt (COD) income. Just be sure to consult an accountant to confirm you handle settlement-related tax reporting correctly. If excessive credit card debt threatens your business’s survival, know that options exist. Professional settlement services like Delancey Street can negotiate win-win agreements that slash your balances while preserving your company. To learn more or get a free consultation with our financial and legal experts, call 212-210-1851 now.

Delancey Street is here for you

Our team is available always to help you. Regardless of whether you need advice, or just want to run a scenario by us. We take pride in the fact our team loves working with our clients - and truly cares about their financial and mental wellbeing.

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