How Much Can I Expect to Save Through Business Debt Settlement?

How Much Can I Expect to Save Through Business Debt Settlement?

If you run a small business, chances are you’ve taken on some debt along the way. Loans, lines of credit, equipment leases – it all adds up. And when business slows down, those debt payments can become difficult to manage.That’s where debt settlement comes in. Debt settlement is an arrangement between a business and its creditors to pay off debt for less than the full amount owed. It can help free up cash flow so you can keep your business afloat.But just how much can you expect to save by settling your business debts? Let’s take a closer look.

How Debt Settlement Works

With business debt settlement, you negotiate directly with your creditors to pay a lump sum that is less than the total debt owed. In exchange, your creditor agrees to forgive the remaining balance.For example, let’s say you owe $100,000 across several business credit cards and loans. You negotiate with the creditors to pay 60% of the debt – $60,000 total. In exchange, the creditors write off the remaining $40,000 you owed.Debt settlement can happen in a couple of ways:

  • You negotiate directly – Reach out to your creditors yourself and negotiate a discounted lump sum payment. This takes some financial know-how but lets you customize agreements.
  • Use a debt settlement company – Hire a company to negotiate settlements on your behalf. Fees often range from 15-25% of enrolled debt. Ensure the company is reputable first.

Either way, once you agree on settlement terms get everything in writing before making payments. An agreement protects both sides if questions come up later.

What Debts Can Be Settled?

Not all debts are eligible for settlementThe best candidates are unsecured debts – those not tied to an underlying asset as collateral. Common examples include:

  • Credit cards
  • Medical bills
  • Personal loans
  • Utility bills

Debts like mortgages, auto loans, and equipment financing agreements tend to have more strict terms and are generally not settled. That said, it never hurts to ask if a creditor is willing to negotiate.

How Much Could I Save?

In generalexpect to settle debts for 40 to 60% of the amount owed. But the savings depend on a few key factors:

1. Type & Age of Debt

  • Credit cards – Usually the easiest to settle since terms are flexible. Expect 50-60% savings.
  • Recent debt – Creditors may refuse discounts on newly opened accounts in good standing. But it never hurts to ask.
  • Past due debt – Once accounts become delinquent, creditors become more likely to settle so they can recoup losses.

2. Overall Financial Health

Creditors look at your overall ability to pay when considering settlement terms. Factors like revenue, assets, credit score, and existing debt load come into play.If your business is financially healthy outside of the debt you’re settling, creditors may not offer deep discounts. But if you’re struggling with bills across the board, you become a higher risk. Creditors may accept a smaller lump sum payment if it means getting something rather than nothing.

3. Payment Timeline

Your ability to pay the settlement amount in a lump sum or structured payments also impacts potential savings:

  • Lump sum settlements – Paying the full amount at once often yields the biggest discounts, sometimes up to 60% savings.
  • Installment settlements – Paying over time limits savings to around 40-50% in total. But installments allow you to settle while freeing up monthly cash flow.

Weighing the Pros & Cons of Business Debt Settlement

Debt settlement can be an affordable path to eliminating business debt under the right circumstances. But it also involves tradeoffs to consider before moving forward:


  • Settle debt for less than you owe – Typically save 40-60% on eligible accounts
  • Free up monthly cash flow – Lump sum or installments divert less money than regular payments
  • Avoid bankruptcy – Settlements prevent business failure and legal turmoil


  • Tax consequences – Forgiven debt often counts as taxable income. Consult a tax professional.
  • Credit score damage – Missed payments preceding settlement remain on your credit history
  • Potential collections – Accounts become vulnerable to collections activity while negotiating settlements
  • Closed accounts – Settled credit lines often get closed, reducing available credit

Whether the pros outweigh the cons depends largely on your business’s financial situation. Sit down with an accountant to discuss tax implications. Then, weigh settlement savings against credit impacts to decide if it aligns with your goals.

Tips for Negotiating Business Debt Settlements

If debt settlement makes strategic sense for your business, follow these tips to negotiate effectively with creditors:

1. Review Debts & Cash Flow

  • Gather statements on all business debts – Know exact balances and terms owed.
  • Analyze monthly cash flow – Determine how much you can realistically allot to debt payments.

2. Pick Which Debts to Target

  • Focus on unsecured debts first – Credit cards, medical bills, personal loans, etc. These are easiest to settle.
  • Start with high-interest debts above 10% – Eliminating high rates saves money long-term.

3. Develop Settlement Offers

  • Research typical settlement rates – Know reasonable offer ranges based on debt type.
  • Start low, around 25% of balance, and negotiate up – Creditors expect back-and-forth.
  • Outline payment timelines – Lump sum or installments. Faster payoff equals bigger discount.

4. Contact Creditors

  • Be honest about your financial hardship – This builds goodwill and credibility for negotiations.
  • Firmly request discounts – Don’t merely ask if they offer reductions. Specific requests get better results.
  • Go back and forth until both sides reach agreeable terms – Be willing to compromise and move closer to their numbers over multiple calls if needed. Just don’t accept anything unaffordable.

5. Get Settlements in Writing

  • Formally draft settlement letters – Outline agreed terms and conditions for each debt.
  • Review carefully before signing – Make sure the letters match your understanding.
  • Keep copies safe – This protects you legally if creditors don’t uphold their end later.

Could Debt Settlement Help My Business?

If you’re struggling with burdensome debts, know that options exist. Debt settlement provides a path to eliminating balances at serious discounts – often 40 to 60% off eligible accounts. This can free up significant cash flow to reinvest in your company’s growth.But settlements also impact credit standing and involve taxes on forgiven sums. So weigh bottom line savings against total long term costs with help from financial professionals. If settlements align strategically, approach key creditors with well-researched offers and negotiate firmly. The more preparation you put in, the better the deals you can strike.At Delancey Street, our dedicated debt experts have negotiated over $4 billion in settlements for small businesses across industries. We’ve helped clients reduce unsecured debts by as much as 60% through custom debt relief programs. And we offer free consultations to analyze your situation and weigh options.To speak with an expert about your specific debt portfolio, call 212-210-1851 or request a free consultation using our online contact form. There’s no obligation to move forward. We’re simply here to provide insights and advice so you can make the smartest financial decisions for your future. With the right plan, you can overcome debt as a barrier to growth.

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