Tips on Strategically Approaching Loan Workouts

Entrepreneurs and small business owners have been among the hardest hit by this new economic reality. One particular burden a lot of companies are dealing with is debt. If you’re going to thrive during the crisis, you may need to restructure the terms of your loans. We are here to help you strategically navigate loan workouts, so you can survive the crisis while maintaining productive relationships with your creditors.

Loan Workouts are a restructuring of your loan to help you recover from the debt without filing for bankruptcy. Your bank usually wants you to remain out of bankruptcy as much as you do. Despite the reputation that banks and private lenders are sharks that will take everything from you if you fail to make a payment, they, in fact, want you to succeed with your loan. The bottom line is that banks and lenders almost always make more money if you pay your loan off. Even if you are behind on payments and full repayment looks doubtful, they want as much money back as possible. In stressful times, creditors are willing to work with you on solutions that will benefit everyone.

When entering a negotiation with your lender, here are 5 things to help you work with your lender:

1. Keep the long-term perspective. You want a creditor who will be your partner for the life of your business. Remind them of that, because they want that too (think repeat customers). If they don’t have this mindset, you may want to consider structuring a workout so you can move on from them.

2. Know your financials and have detailed financials ready. Your lender is sometimes required to review these financials, but having them in front of you will allow you to know your options and will help you and your lender come up with creative solutions.

3. Evaluate the value of the collateral. Make sure you know the value of the collateral you have for the loan. If the value has increased or decreased, it will impact negotiations.

4. Come with options planned out. This is where it helps to talk with someone who understands how to navigate loan workouts. If you’re going it on your own, keep the long-term context and think of the leverage you might have.

  • What collateral did you pledge?
  • How big are they?
  • What is the loan term and what works for your business? Maybe you need a payment deferral or forbearance—if so, make sure you get the events of default waived.

5. Stay persistent, polite, and professional. Remember that your creditor, or the person working with you, may be dealing with pressures outside of their control.

As you begin to move forward with a loan workout, never forget that your creditors want to work with you, not against you. Especially in difficult times such as now. If you follow these five steps, you’ll be on your way to success.

For a free 10 minute consultation with one of our attorneys give us a call at 385-355-0471 or sign up for a time , here .

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For small business owners in Utah, growing the team is an exciting milestone and you’ve likely faced the classic question: Should I hire an actual employee, or can I just find a "guy who knows a guy" and pay him via Venmo? While it might be tempting to treat an employee (W-2) and an independent contractor (1099) as interchangeable based on your budget, the IRS and the Utah Labor Commission see things very differently. Misclassifying a worker isn't just a clerical error; it can lead to significant back taxes and penalties. Here is a practical look at the differences to help you stay compliant while you scale. The Independent Contractor (1099) Think of a contractor as a separate business entity that you have hired to perform a specific project or attain a specific result. They are specialists who bring their own "secret sauce" to the table. Autonomy : They generally use their own equipment, set their own hours, and work from their own locations. The "What" Not the "How" : You have the right to control the result of the work, but not the specific methods used to achieve it. Financial Independence : They pay their own self-employment taxes, health insurance, overhead, and will typically invoice you for their services. They may have other clients besides your business. The Employee (W-2) An employee is someone who is fully integrated into your business operations. They are part of the daily rhythm of your company and are under your direct supervision. Direction and Control : You dictate when they work, where they work, and the specific sequence of their tasks. You provide the equipment to complete those tasks. Business Integration : Their services are usually a "key aspect" of your regular business activity. If your business is a bakery, the person baking the bread is likely an employee; the person fixing the oven is likely a contractor. Employer Obligations : You are responsible for withholding income taxes and paying a share of Social Security and Medicare. In Utah, you’ll also need to ensure you're covered for Workers' Compensation and Unemployment Insurance. The Bottom Line: Control The government looks closely at the reality of the working relationship , not just the title you put on a contract. Your degree of control , or lack thereof, is key. Ultimately, if it looks like a duck and quacks like a duck, they’re going to treat it like a duck. Taking the time to classify correctly now prevents headaches down the road. We are here to help you craft, review, and amend employment and contractor agreements and navigate any other issues that may arise as you scale your workforce.