Companies Choose Business Debt Settlement

Business Debt Settlement: The Solution More Companies Are Choosing As
Economy Gets Tougher

While debt is always a concern for closely held companies, the current
economy and competitive pressures make it even more so now. As a result,
business owners increasingly are looking beyond the traditional
solutions--commercial debt consolidation and bankruptcy--and discovering
that professional debt settlement can be a far less costly, less stressful
route to debt relief.

Highland Park, IL (PRWEB) March 14, 2007 -- Now more than ever, debt is a
double-edged sword for closely held companies, and requires special
attention, according to the president of a leading commercial-debt
settlement firm.

Wal-Mart's . . . low prices routinely reset our expectations about what all
kinds of things should cost--from clothing to furniture to fresh fish. Jim
Herst, founder and president of Performance Source Inc (PSI) notes that a
host of outside pressures is making it more difficult for small businesses
to maintain the steady cash flow needed to keep their debts under control.
Faced with these challenges, it's no wonder more of them are seeking outside
help to manage their debts.

Running Your Business Isn't Getting Easier
Herst cites several current factors which are making it harder for private
companies to manage their debts:

- In February, 4th-quarter 2006 GDP growth was revised downward--from an
initial estimate of 3.5% to a far weaker 2.2%. It was the largest downward
revision in the GDP in a decade. The lower growth rate suggests that more
businesses are seeing reduced demand for their goods and services, hampering
their ability to pay their debts.

- Raw material costs are rising. Higher gasoline prices are only part of the
story. Industry Week magazine reports that copper prices have doubled in the
past year, nickel prices are on the rise, and other material costs are as
volatile as they have ever been. In response, manufacturers who buy these
materials are raising their prices . . . which cuts into the cash flow of
the firms who buy their products.

- The U.S. economy is increasingly sensitive to global economic news. On
February 27 China's Shanghai Composite market dropped 8.8%, immediately
triggering significant declines in both U.S. and foreign markets. It was
another example of how fast global economic news can hit the stock
investments that closely held companies rely on for a variety of
needs--indirectly reducing their ability to make debt payments.

- Competition, both big and small. In his book "The Wal-Mart Effect," author
Charles Fishman says, "Wal-Mart's . . . low prices routinely reset our
expectations about what all kinds of things should cost--from clothing to
furniture to fresh fish." At the same time, tiny, low-cost online merchants
have made nearly every category of consumer and business goods more
competitive than ever.

As PSI's Herst points out, "Even closely held firms which have grown despite
these challenges are likely feeling a heavier debt burden now. Many business
owners rely on credit cards or mortgage loans--increasingly ones with
variable rates--to launch or expand their operations." Besides being more
costly to use as interest rates have risen, many credit cards' minimum
payments have recently jumped to 3 or 4% (from the typical 1.5%) of the
outstanding balance.

Options for the Business In Debt
What can a private-business owner do if his (or her) company's debt load has
become a problem?

Herst notes that most owners prefer to try to 'ride out' the rough patch.
"Unfortunately this approach often makes the situation worse," he says.
"Consolidating the debts with a new loan is another option, but in most
cases the owner will have to put up collateral such as a home or major
assets of the business. Plus, the long-term cost of the consolidation is
often greater than what is currently owed on the debts.

"Bankruptcy is a third way to go but not as attractive as it used to be: The
2005 Consumer Bankruptcy Reform Act has unintentionally made it harder for
small businesses to wipe away debts. Even when a credit card is opened in
the name of a business, the card's terms and conditions are likely to say
that the person opening the account is responsible for the debt."

What About Debt Settlement?
As a result, Herst explains, more business owners are looking for a better
solution--and discovering debt settlement. If an experienced, professional
negotiator is hired to deal with each creditor individually, he says, some
of the business' debts could shrink by as much as 70%. He advises business
owners to look for an experienced pro who will also handle all calls and
letters from their creditors--allowing the owner to focus on rebuilding
sales.

"A key question that any business owner should ask a debt-settlement firm is
how it earns and collects its fees. Ideally, the fees should be based solely
on the dollar amount of debt savings achieved for the client. This makes
debt settlement a virtually risk-free solution."

That's not to say that debt settlement is perfect, or appropriate for all
companies' financial situations, Herst acknowledges. It's primarily intended
for companies already behind on their payments and looking to make a fresh
start. Because they are "in arrears" on their debts, these firms' Dun &
Bradstreet ratings usually have already dropped. Debt settlement activity
may initially lower these ratings further, but in most cases it is also the
first step in rebuilding the client's rating--because payments are now being
made where they weren't before.

Herst concludes, "If your company is dealing with heavy debt, you're not
alone. Many companies are struggling against economic conditions beyond
their control. But don't assume your debt problem will take care of itself.
While debt consolidation or bankruptcy might seem like the most obvious
options, remember that debt settlement could get your business back on track
financially with far less cost and stress to you."

CONTACT INFORMATION
JIM HINCKLEY
Performance Source Inc.
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708-352-7417