Can a Business Loan Be Settled Following Financial Losses?

Can a Business Loan Be Settled Following Financial Losses?

Sometimes a business loan turns out to be difficult to repay either because of less sales or the customer took longer to pay you or maybe your operational expense were high. Few times it is not that you are not able to payback. You just ran out of money.

Yes, you can settle your business loan even if your business faced a loss. But that depends on the bank/lender, your financial condition at present, your loan agreement and the cause of default. So there is a possibility of settling your loan which you can utilize for getting a resolution.

A Business Owner living in Delhi NCR or elsewhere in India will think- What if bank doesn’t agree for loan settlement. Will they start recovery process from where they left? What if I gave personal guarantee /property as collateral. Will I get sued by bank etc.

Well, first you need to understand how much you owe to your lender and what all options you have. You may either go for One Time Settlement (OTS), Loan restructuring, Modification of terms or any other way which would work for both you and the lender. There can be multiple options available for you.

Don’t think that since your Business has suffered a genuine loss, you can walk into the Bank and ask them to waive your loan. Also, don’t lose hope if you have already received a recovery notice from Bank means you can’t settle your loan.

You can always hire a Business Loan Settlement Lawyer and ask for his help. He will go through your documents and guide you accordingly. You can contact Advocate BK Singh Loan Settlement Lawyer to know your options against your defaulted Business Loan.

Why Does Business Loan Settlement Matter in India?

It's possible that things just start going south for your business and you can no longer afford to pay EMIs even though your business was profitable during the time of sanction. Missed orders or your account could be suspended or High cost of goods. One large customer of yours stops paying you, suddenly your account can dive into negative.

Provided you operate your business in Delhi, Noida, Gurgaon, Faridabad, Ghaziabad or any other business centers you could end up getting calls from the lender and paying late payment fees. Your account could be declared an NPA if applicable. You could even end up facing recovery actions.

Most lenders would let you settle as per their policies. This would vary depending on your account, how they want to see you as a borrower, what security they have against the loan and what suits them as well. Sure you can tell them your facing financial difficulties and want a settlement but that doesn't mean they will allow you to go away with a lesser amount.

This will even impact your personal life if you provided a personal guarantee or any of your directors provided their personal guarantee. If the company provided any of there commercial properties as security. Basically it all depends on what your case involves.

The earlier you contact us the better you can understand if its a mere settlement situation or your staring at a legal battle. It also gives you the chance to understand the numbers instead of jumping into something that can trouble you for years.

What Does Business Loan Settlement Mean?

Business Loan settlement is when you come to an agreement with your lender to clear their dues by paying them an amount. It can be lesser than what they have claimed from you on certain terms. You can pay in one shot or follow any other payment schedule as per the lender's discretion and their approval in writing.

Let's say a manufacturer at Faridabad took a loan of ₹ 40 Lakh to buy machines and keep his business running. He lost out on 2 big clients and stopped earning enough money. Many EMI's are pending. So he can pay whatever is in his capacity in one go instead of following a particular installment schedule.

Now it will be on the lender's judgement whether to accept your offer or ask for more or restructure your emi plan. Or even take further steps towards recovery.

There are few things you should not confuse:

So know what option best suits your scenario if you are in above position.

Who Should Consider Business Loan Settlement?

Where the debtor has experienced a continuous loss of revenue from there business it may be beneficial to explore settlement.

If you have taken out a working capital loan as a sole trader and have recently lost a key client. Or maybe you are a partnership who have fallen behind on your installment's due to a unsuccessful venture. Private Ltd companies who have build up there business debt over an extended period of no revenue.

The above borrowers will want to consider if settlement is an option for them. If you have recently experienced a dip in revenue but can make your normal repayment's once back in the black it may be more suitable to approach the bank for restructuring instead of trying to offer a settlement you can't afford.

This will need further consideration if the business has ceased trading or if any security has been given against the facility or personal guarantee. Speak to a loan settlement lawyer such as BK Singh for further advice on settlement.

What Documents Should You Prepare?

This will vary based on what loan you are seeking and why you have defaulted. Having all of your paper work ready will help the bank look at your situation. As well as allow a lawyer to spot any faults in the contract.

Some things you should have on hand:

• Your loan sanction letter and loan contract.
• Current statement on your loan. Loan schedule and amount in arrears.
• Bank statements with business money coming in and out of account and current balance.
• P/L statements, Balance Sheet and last few years business accounts if available.
• GST returns and Tax returns if available. Any other documents you may have on hand that pertain to your finances.
• If there is security for the loan. Have that information on hand as well (mortgage).
• Personal Guarantee's if you signed any.
• Amount of funds you can provide for settlement. Where the funds are coming from.

There may be some of these documents that you don't need to supply. Depending on the scenario at hand. You may be a company and have different accounts than someone who owns a single business. Make sure to check if your loan has security on it.

Do not lie or alter documents to provide to the bank for a settlement. If your information is incorrect it can harm you in the future.

How Long Does Business Loan Settlement Take?

No fixed period as per law within which all the banks/NBFC will have to agree on or close a Business loan settlement case. It may take few days if your proposal is simple and easy to understand. Depending on how big is your account. How many loans you have, no. Of sureties, how much money you are proposing to pay. Whether there are recovery proceedings pending etc.

It will be quicker to agree on a simple proposal then a big account with lots of loans, sureties or any dispute in security. If there is any counter offer or if they ask you to submit more financials it may take longer.

Do remember about the notice's timeline when you are negotiating with the bank. As said before there is a 60 day notice period after qualifying demand notice is sent as per sec 13(2). Or if its a section 17 application then you have a time period of 45 days from Sec 13(4) action. This period applies for each of the above mentioned actions only.

When you receive any such notice do not rely on the fact that you have submitted an OTS and the period will be extended. Seek legal advice when there is a notice, possession action, auction or any court proceedings going on.

When Should You Consult a Business Loan Settlement Lawyer?

When you should take legal advice from a lawyer if lender refuses to settle the dues or challenges the amount. Also when there's a legal demand/ recovery notice issued by lender. If any property is secured with loan or there is a timeline as per some statute/ court order/ forum proceedings it becomes important to take advice.

Also when there is doubt on taking a restructuring/settlement. If someone has approached for personal guarantee or the offer from lender doesn't mention clearly about the rest of the dues.

People may have relationships with different Bank branches/NBFCs/ Recovery Agents/ Forums across Delhi NCR. Depends on the loan and area they fall under. Our online consultation will help them know what's happening if their loan falls under another city in India (depending on the requirement of the case and advocate).

You can take advice from Advocate BK Singh as he is a Loan Settlement Lawyer. He will go through your papers and tell you where you stand and if anything needs to be responded. There is no assurance that the lender will accept your offer. But at least you can take a call with proper guidance.

How Can Loan Settlement Lawyer Help?

Loan Settlement Lawyer works on a service based model. When you have business loss and your loan instalments become due but you cannot pay them. We look at your situation and work on the problem at hand. Not every defaulted loan has to be treated the same way.

Assistance could range from perusing your loan papers and guarantees. Help you with lender dues, arranging your finances and preparing a proposal to the bank/lender. If the lender has initiated steps towards recovery we will take care of your legal position and deadlines as well.

If you are a businessman with a Bank Loan or N.B.F.C loan or any form of secured working capital then this service can be helpful. It all depends on the lender and agreement you have made. And what kind of security you have offered.

Please visit our website for more details on Loan Settlement Lawyer. Advocate BK Singh can guide you through what are the differences between a Settlement, Restructure and replying to recovery proceedings.