At some point, business owners will incur debts from the bank, vendors, and friends, to name a few. These don’t include personal loans they need to pay like mortgage and probably student loans.

If days are good, the sales and cash flow are enough (or even beyond sufficient) to settle these debts. On bad ones, though, they may find these creditors breathing down their necks, calling incessantly, and even threatening lawsuits.

Sadly, no thanks to the pandemic, many entrepreneurs may be facing the second situation. According to the World Bank, businesses are already showing signs of insolvency. In Utah, about 10 percent of its restaurants have decided to close for good in 2020.

How can one call a time out without further ruffling more feathers, so to speak? Business owners can consider these steps:

1. Review Payment Records and Behavior

For those who have been religious in paying their debt with interest, who rarely ask for extensions or negotiate their terms, and who have been loyal customers for years, now is the good time to use this good behavior as leverage.

• Business owners may be able to ask confidently for discounts, interest waivers, and longer payment terms.
• Many creditors are actually scared of losing great customers or damaging an excellent professional relationship that takes years to build.
• By now, the company’s previous actions illustrate credibility and trust. Several creditors see this as a sign that when the business is on track again, the owners will also resume paying the exact amount.
• Creditors would rather receive a partial or interest-free payment than none at all.
• Like debtors, many creditors don’t want to go through lengthy collection processes.

2. Explore Various Payment Options

No business will ever know if a creditor is open to a time out or break unless it asks. However, it would be better if the company already has a plan in mind on how to repay the debt. They can explore a variety of options.

First, there’s debt consolidation. In this process, the business can merge all existing debts and take up a single loan to pay them. This way, it thinks of only one loan and interest. It may also take advantage of a much lower interest rate than what other creditors charge.

The second choice is to use home equity. Business owners can get a lump sum fund through a home equity loan or create a HELOC (home equity line of credit). With the latter, one can borrow an amount usually up to the limit of the property’s equity. Then they pay back the money with interest.

If other methods fail, the third option is bankruptcy. Because this is a decision with a possibly severe impact on finances and credit status, an entrepreneur should talk to an expert first.

Bankruptcy rules, like exemptions, can vary between states. Thus, businesses operating in Salt Lake City, Ogden, or Provo needs to talk with a bankruptcy attorney. They can also help choose the best bankruptcy method.

For instance, entrepreneurs who don’t plan to run the business anymore can opt for Chapter 7, which is the most common. This one focuses on liquidating the assets to pay off the creditors, depending on the exemption.

In the Beehive State, the court cannot force an individual to certain types of pension, personal property like artwork made by or depicting a family member, motor vehicle up to $2,500, and tools of the trade up to $5,000.

Chapter 13, meanwhile, is a possible choice for business owners committed to paying off their debts but don’t want to sell their assets. The court will help the debtor create a payment plan for five years to repay all secured loans and a percentage of the unsecured debt.

3. Maximize State Debt Assistance and Grants

The majority of the businesses in Utah have been affected by the COVID-19 pandemic, and they can get help from the state to support some of their financial needs.

One popular program is the Paycheck Protection Program (PPP), which is intended for small businesses that strive to keep their employees despite the pandemic. In return, they can apply for a loan and receive debt forgiveness for expenses incurred, such as payroll and rent and utility payments enforced before February 15, 2020.

The Utah Microloan Fund supports low-income and underserved communities in the state by providing business training and small business loans up to $50,000 for those who cannot qualify for traditional sources of funds.

When there’s no money in the coffers, facing creditors is difficult, but running away or pretending it isn’t happening is worse. Asking for a reprieve and getting help as soon as possible are still two of the best ways to deal with the problem.