As a business or medical practice owner, you may find yourself in a situation where you have high-cost debt on your books, such as merchant cash advances and other high-cost loan products. Refinancing or restructuring that debt can help reduce your payments and improve your cash flow. In this blog post, we’ll explore how owners can decide which option is best for dealing with existing high-cost debt: FDIC Bank Financing or Debt Restructuring.
FDIC Bank Financing is a type of loan that is issued by a US bank and insured by the Federal Deposit Insurance Corporation (FDIC), which is basically Uncle Sam. This financing option is typically the most coveted because it offers the lowest cost & best terms. FDIC Bank financing is available to small businesses and medical practices, and in this instance, is often used to help them refinance existing high-cost debt. This can offer several benefits, including:
However, qualifying for FDIC Bank Financing can be more difficult. Businesses must meet stricter eligibility requirements, including demonstrating good credit and cash flow. Additionally, the application and funding process will take more time than Debt Restructuring, with a lot more documentation required because a new loan is being generated.
It is important to note that FDIC Bank Financing will only be a viable option to those applicants who are currently in good standing with the existing high-cost debt they are servicing now. If the bank sees that you can’t support your present debts, and don’t honor your existing signed loan agreements, then why would they want to do that same exercise again?
Debt Restructuring is another option, especially for businesses or practices struggling to keep up with their high-cost debt payments. This option involves attorney-led teams negotiating with creditors to restructure existing debt notes, typically by extending repayment terms and/or reducing interest rates. Some benefits of Debt Restructuring include the following:
Nothing is for nothing, however, so Debt Restructuring can have some specific risks, depending on your scenario. Please reach out to discuss these and how they relate to your specific circumstances.
When deciding which option is best for dealing with your business’s debt, FDIC Bank Financing or Debt Restructuring, there are several factors to consider, particularly when dealing with high-cost debt:
Ultimately, the decision between FDIC Bank Financing or Debt Restructuring will depend on your business’s or practice’s unique financial situation and needs. If your business has high-cost debt and is struggling to make its payments, Debt Restructuring is likely the better option as it can help you enhance your cash flow immediately. However, if one’s practice or business has good credit and cash flow, but just has high-cost debt on the books, then FDIC Bank Financing for refinancing debt may be a more attractive option as it offers lower interest rates and longer repayment terms. With the right option, you can become more secure, and achieve the all-weather financial and practice sustainability that you desire.