Five Options You Can Use When You Can’t Repay Your Business Loans

When starting a business, one of the biggest challenges can be getting financing. And once you’ve finally gotten the money, the last thing you want to worry about is how to repay it.

But sometimes, things make it impossible for business owners to keep up with their loan payments. If you find yourself in this situation, don’t panic. Here are five options you can use when you can’t repay your business loans.

Loan Consolidation

Loan consolidation is taking out a new loan to pay off multiple existing loans. It is a good option if you’re struggling to make payments on various loans with different interest rates and terms.

By consolidating your loans, you’ll have just one payment to make each month, which can make things simpler and easier to manage. And depending on the terms of your new loan, you may even save money on interest.

The main benefit of loan consolidation is that you don’t have to worry about different interest rates from other loans. All your loans go into just one account with a much lower interest rate.

The disadvantage is that you might have to pay this particular loan your whole life. But on the other hand, it might have lower interest rates, but the accumulation of the total amount you borrowed could be a lot more.


Refinancing is similar to consolidation in that you take out a new loan to pay off multiple existing loans. But with refinancing, you’re usually able to get a lower interest rate, which can save you money over the loan’s life.

Refinancing can also help you change the terms of your loan, such as the length of the loan or the monthly payment amount. It can make your loan more manageable and easier to repay.

If you do refinancing at the right time, you can have a much lower interest rate on your refinanced loan. Currently, mortgage rates are pretty low, making it a great time to refinance your home.

The main disadvantage of refinancing is that it can be costly. There are usually fees associated with a new loan, and you might have to pay for things like appraisals and title insurance.

A businessman showing his empty pockets

Deferment or Forbearance

If you’re struggling to make payments, you might be able to defer or forbear them. This means that you can postpone making payments for some time. Both options can be used for commercial mortgages you might have gotten.

With deferment, the interest on your loan will continue to accrue during the deferment period, which means your loan balance will grow larger. But with forbearance, the interest will not accrue, which can help you save money.

It can give you a break from making loan payments. It can also give you time to get back on your feet financially and make it easier to repay your loan. However, your loan balance will continue to grow as the interest accrue. And if you cannot make payments when the deferment or forbearance period ends, you could default on your loan.

Loan Modification

If you’re struggling to make payments on your loan, you might be able to modify the loan terms. It could involve changing the interest rate, extending the loan length, or reducing the monthly payment amount.

Loan modification can be a good option if you’re having trouble making payments but don’t want to default on your loan. It can also help you avoid foreclosure if you’re behind on your mortgage payments.

The main disadvantage of loan modification is that it can be challenging to qualify for. You’ll usually need to demonstrate that you’re struggling to make payments and show that you have a good reason for requiring a modification.

You might also have to pay fees to modify your loan, which can be time-consuming.

File For Bankruptcy

If you’ve exhausted your other options, you might need to file for bankruptcy. This is the last resort option and should only be considered if you’re unable to repay your loans and have no other way to improve your financial situation.

There are two ways you can file for bankruptcy. Chapter 13 bankruptcy is favorable if you’re a sole proprietor. It’s because you can keep your business and restructure your debts. You have to pay your debts in installments for the coming years.

Chapter 7 bankruptcy is typically used by individuals and is less favorable for businesses. It’s because it can involve liquidating your assets to repay your debts.

Filing for bankruptcy can give you a fresh start financially and help you get out of debt. But it’s a significant decision and should only be considered a last resort.

Many options are available to you if you’re struggling to repay your business loans. You should explore all your options and choose the one that’s best for your situation. If all things fail, feel free to file for bankruptcy. Remember that it’s not the end of the world. It might just be able to save you and your business.

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