Credit Counseling: Could You Benefit

Small businesses can benefit from credit counseling if they are having difficulties managing company debt. Lenders will consider your business credit score when evaluating loan applications, so it is important to get the help you need to properly manage your business debt. If your company is having difficulty managing business finances and debt, credit counseling may be the step you need to take. It is important to note, however, that this option is not the best choice for every company.

How Business Credit Counseling Works

The business credit counseling process is similar to the consumer credit counseling process, only rather than examining household expenses, they review balance sheets, accounts payable, and accounts receivable. When working with a business, credit counseling agencies will appoint a financial adviser who will analyze the company, amount of debt, cash flow patterns, and future goals of the business. They will then present budgeting options to help the company improve their cash flow situation while paying down debt at the same time. Business credit counselors will help business owners to restructure their finances by helping the company create a plan.

Some business credit counselors will also negotiate directly with lenders on the company's behalf to reduce interest rates or overall debt due. They also arrange a repayment schedule that is affordable.

How Companies Can Benefit from Credit Counseling

Companies that are struggling with debt management can avoid bankruptcy. They will be able to take control of their company's finances rather than harming their company's reputation and business credit score.

Business owners can learn to budget their business expenses better. Financial advisers can present options that they had not thought of before.

Ultimately, the company has control over how much money they will set aside for debt payment. Business owners are able to determine for themselves what they can afford, without having a court imposed order (as with bankruptcy). Counselors who negotiate payments make this process easier. Since timely repayment is a crucial factor in business credit scores, such an arrangement will improve this number for the company.

Some Drawbacks

Companies that are current with payments, may not benefit from credit counseling assistance because there are fees imposed to the business for their counseling services.

These programs vary from agency to agency. The fees, services offered, and methods can be very different. It is important to make sure that they do not use harmful debt settlement tactics such as advising you to stop making monthly payments to creditors to leverage negotiations.

Business credit counseling agencies cannot simply remove delinquencies or bankruptcy that are already on your credit report. They can offer negotiation assistance, and perhaps get your company on the right track that can help improve your business credit score.  A counseling company cannot erase damage that is already done.

Before you decide to seek this kind of help, explore the different options available. Don't simply sign up with the first service you find.