How to Negotiate with Business Creditors

Negotiating with creditors isn't magic—it's a skill anyone can learn. Creditors would rather get something than nothing. If your business is struggling, they'll often accept reduced payments, lower interest rates, or lump-sum settlements rather than risk getting zero in bankruptcy.

This guide gives you the exact words to say, when to say them, and how to get the best deal possible.

Before You Call: Preparation

Negotiation starts before you pick up the phone. Preparation determines your success.

1. Know Your Financial Situation

Calculate:

• Total monthly revenue
• Total monthly expenses (essential only: payroll, rent, utilities)
• Available cash (checking + savings)
• Total debt owed (all creditors combined)
• Monthly debt payments (current requirement)

Key Number: How much can you realistically afford to pay each month across ALL debts?

Example: Revenue $30K/month, expenses $25K/month = $5K available for debt. If current debt payments are $10K/month, you're $5K short.

2. Prioritize Your Debts

Not all debts are equal. Pay in this order:

1. Payroll taxes (IRS/state): Criminal liability, non-dischargeable in bankruptcy
2. Secured debt: Mortgage, equipment loans (or lose the collateral)
3. Essential vendors: Suppliers you need to stay in business
4. Unsecured debt with personal guarantee: Protects your personal assets
5. Unsecured debt without guarantee: Lowest priority

3. Gather Documentation

Have ready:

• Recent P&L statement or bank statements
• List of all debts (creditor, balance, monthly payment, interest rate)
• Account numbers
• Written hardship explanation (if applicable)

4. Decide Your Goal

What are you asking for?

• Payment reduction: Lower monthly payment temporarily or permanently
• Interest rate reduction: Reduce rate to make debt affordable
• Forbearance: Pause payments for 1-3 months
• Settlement: Pay lump sum for less than owed (40-60% typical)
• Payment plan: Spread past-due amount over 6-12 months
• Term extension: Extend loan term to lower payment

The Negotiation Process

Step 1: Call the Right Department

Don't waste time with customer service. Ask for:

• Collections Department (if behind on payments)
• Hardship Department (if current but struggling)
• Workout Department (banks/SBA lenders)
• Loss Mitigation (real estate loans)

Script: "I need to speak with someone about my account. I'm having financial difficulty and want to discuss options to keep this account current."

Step 2: Opening the Conversation

Be honest, direct, and humble:

Script for Hardship (Still Current):

"Hi, my name is [NAME] and I have account number [XXXX]. My business has been hit hard by [revenue loss/COVID/industry downturn], and I'm having trouble making my payments. I want to keep this account in good standing, but I need help. What programs do you have for businesses in financial hardship?"

Script for Already Behind:

"Hi, I'm [NAME], account [XXXX]. I know I'm behind on payments—I've had [specific hardship]. I want to bring this current and avoid default. Can we work out a payment plan or modified arrangement?"

Key Principles:

• Acknowledge the debt (don't deny or argue)
• Express intent to pay (they need to believe you're good faith)
• Explain hardship briefly (don't over-explain or make excuses)
• Ask for their help (make them feel they're problem-solving with you)

Step 3: Let Them Talk First

After explaining your situation, STOP TALKING.

Ask: "What options are available?"

Let them offer solutions. They may offer better terms than you were going to ask for.

Step 4: Negotiate Terms

Whatever they offer, negotiate:

If they offer payment reduction:

"I appreciate that. The challenge is that I have multiple creditors, and even with that reduction, I'm still short $X per month. Is there any flexibility to go lower?"

If they offer forbearance (payment pause):

"That helps short-term. But when the forbearance ends, I'll have the same problem. Can we discuss a permanent modification to the payment or interest rate?"

If they say no modification is available:

"I understand. The problem is I can't afford the current payment. If I can't get modification, my only option may be bankruptcy. Is there someone else I can speak with—a manager or workout department—before we reach that point?"

Note: Mentioning bankruptcy is powerful but use sparingly. It signals you're serious, but if overused, they'll call your bluff.

Step 5: Make a Specific Offer

If they won't offer terms, make your own proposal:

Payment Reduction Offer:

"Here's what I can do: I can pay $[AMOUNT] per month for the next 6 months while I stabilize the business. That's [X%] of the current payment. After 6 months, we can revisit increasing it. Will that work?"

Lump-Sum Settlement Offer:

"I have $[AMOUNT] available right now. If I pay that as a lump sum to settle this account in full, will you accept it and mark the account paid?"

Start at 40-50% of balance for settlements. Expect counters at 60-70%. Typical settlement range: 50-60% of balance.

Interest Rate Reduction Offer:

"The 18% interest rate is making this debt impossible to pay down. If you could reduce the rate to 8-10%, I can commit to consistent monthly payments. Can we do that?"

Step 6: Get It In Writing

NEVER accept verbal agreements.

Before making any payment on modified terms:

"I appreciate you working with me. Before I make this payment, can you send me written confirmation of the new terms via email? I need documentation for my records."

Written agreement must include:

• Account number
• New monthly payment amount
• New interest rate (if changed)
• Duration of modification
• Whether it reports to credit bureaus
• Settlement: Confirm account will be marked "paid" or "settled in full"

Step 7: Make the First Payment Immediately

Agree to terms, then make first payment the same day or next business day.

This shows good faith and locks in the agreement. Some creditors will reverse agreement if you delay.

Negotiation Scripts by Creditor Type

Credit Card Companies

Goal: Hardship program (0% interest for 6-12 months + reduced payment)

Script:

"I've been a customer for [X years] and always paid on time until recently. My business revenue dropped by [X%] due to [hardship]. I want to keep this account in good standing, but the 19% interest makes it impossible. Do you have a hardship program that can reduce my interest rate and payment for 6-12 months while I stabilize?"

What They Typically Offer:

• 0% interest for 6-12 months
• Reduced minimum payment (2-3% of balance instead of 4-5%)
• Account closed to new charges
• May report to credit bureaus as "paying under hardship plan"

SBA Lenders

Goal: Loan modification or Offer in Compromise

Script:

"I have SBA loan #[XXXX]. My business has experienced significant hardship: [specific circumstances]. I'm current on payments but it's taking all available cash and I can't sustain it. I want to discuss modification options—either reducing the payment, extending the term, or deferring payments temporarily. What options does your workout department offer?"

What They May Offer:

• 3-6 month payment deferral
• Interest-only payments for 6-12 months
• Term extension (e.g., 10 years to 15 years)
• Offer in Compromise (if business closed: settle for 20-40% of balance)

See our SBA Loan Debt guide for detailed OIC process.

Merchant Cash Advance (MCA) Companies

Goal: Stop daily ACH, negotiate payoff

Script:

"I have MCA contract #[XXXX]. The daily withdrawals are crippling my business—I can't make payroll or pay rent. I want to work out a resolution. I can offer [X% of balance] as a lump-sum payoff, or we can set up a weekly payment plan. If we can't reach agreement, I'll have no choice but to change bank accounts and consult an attorney. I'd prefer to work this out directly."

What They May Accept:

• 50-70% lump-sum payoff
• Weekly payments instead of daily
• Reduced total payback amount

MCAs are aggressive. See our MCA Debt Trap guide for advanced strategies.

Equipment Financing Companies

Goal: Avoid repossession, modify payment

Script:

"I have equipment loan #[XXXX] and I'm behind [X months/payments]. I want to keep the equipment—it's essential to my business operations. Can we restructure this? I can pay $[AMOUNT] per month going forward, and I can spread the past-due balance over 6-12 months. Will that prevent repossession?"

Alternative (Voluntary Surrender):

"I can no longer afford this equipment. I'll voluntarily return it if you'll agree to waive any deficiency balance. Otherwise, this is heading to bankruptcy and you'll get nothing."

Vendors/Suppliers

Goal: Payment plan on past-due invoices

Script:

"I owe you $[AMOUNT] and I know I'm past due. You've been a great partner and I want to make this right. Here's what I can do: I can pay $[AMOUNT] per month for [X months] to clear the balance. I'll also stay current on new invoices going forward. Does that work?"

Leverage: "I value our relationship and want to continue working together long-term."

IRS/State Tax Agencies

Goal: Payment plan or Currently Not Collectible status

For IRS (call 1-800-829-1040):

"I owe business taxes for [years]. I can't pay in full, but I want to set up a payment plan. Based on my current financials, I can pay $[AMOUNT] per month. I'd like to set up an installment agreement."

If you truly can't pay anything:

"My business has no ability to pay right now. I'd like to apply for Currently Not Collectible status. I can provide financial statements showing there's no disposable income."

See our Business Tax Debt guide for IRS-specific strategies.

Leverage Points in Negotiation

1. Bankruptcy Threat (Use Carefully)

If you're genuinely considering bankruptcy, mention it:

"If we can't work something out, my only option is filing bankruptcy. In Chapter 7, you'll get nothing. In Chapter 11, you'll get pennies on the dollar over 5 years. I'd rather avoid that and pay you directly, but I need realistic terms."

When this works: You have substantial debt and creditor knows bankruptcy is realistic.

When it doesn't work: Small balances where creditor doesn't believe you'd actually file.

2. Lump Sum Cash

Cash is king. Creditors will discount heavily for immediate payment:

"I have $[AMOUNT] cash available right now. I can wire it today if you'll settle this account in full. That's [X%] of the balance. Take it now, or risk getting less in collections or bankruptcy."

Typical discounts: 40-60% of balance for lump-sum settlements.

3. Multiple Creditors

Use scarcity:

"I have 5 creditors and only $2,000/month to distribute. Whoever gives me the best terms gets priority. Right now, [other creditor] offered [better terms]. Can you match or beat that?"

4. Age of Debt

For old debt (6+ months delinquent):

"This debt is over a year old. You've likely already written it off and sold it for 10-20 cents on the dollar. I'm offering you [40-50%] directly. That's better than you'll get from a collection agency."

5. Documentation of Hardship

Provide proof:

• Bank statements showing low balances
• P&L showing revenue decline
• Medical bills (personal hardship)
• Layoff notice or business closure notice

Creditors are more willing to negotiate when they see you're not just unwilling to pay—you're genuinely unable.

What to NEVER Say

• "I'm not paying": Makes you adversarial. Say "I can't pay the current amount" instead.
• "It's not my fault": They don't care. Take responsibility and focus on solutions.
• "I'll pay when I can": Too vague. Make specific commitments.
• "My lawyer will call you": Unless you actually have a lawyer, this ends negotiation.
• Lying about financials: If they catch you in a lie, negotiation is over.
• "Other creditors gave me better terms": (If it's not true) — Don't bluff if you can't back it up.

When to Walk Away

Some creditors won't negotiate reasonably. Know when to stop:

• They demand full payment only: If you truly can't pay, tell them you'll consult bankruptcy attorney
• They're verbally abusive: Ask for supervisor or hang up and try again later
• They threaten illegal actions: Document threats, consult attorney
• Terms are worse than bankruptcy: If settlement is 90% of balance, you're better off filing Chapter 7

After the Negotiation

1. Get Written Confirmation

Before making ANY payment:

• Request written agreement via email or mail
• Verify account number and terms
• Confirm reporting to credit bureaus

2. Pay Exactly As Agreed

Even one late payment can void the agreement. Set up autopay if possible.

3. Keep Records

Save:

• Written agreement
• Payment confirmations
• Bank statements showing payments
• Notes from phone calls (date, time, rep name, what was agreed)

4. Monitor Credit Reports

Ensure creditor reports correctly:

• Payment plan should show as "paying as agreed" (if current)
• Settlement should show as "settled" or "paid" (not "charged off")

5. Request Deletion (For Settlements)

After paying settlement in full, request "pay for delete":

"I've paid the settlement in full. As a courtesy, will you delete this tradeline from my credit report? I'd appreciate your consideration."

Not guaranteed, but worth asking. Some creditors will remove negative reporting.

Sample Negotiation Letters

Hardship Letter Template

[Your Name]
[Business Name]
[Address]
[Date]

[Creditor Name]
[Creditor Address]
Account Number: [XXXX]

Re: Request for Hardship Assistance

Dear Sir or Madam,

I am writing to request modification of my account due to financial hardship. My business, [Business Name], has experienced [specific hardship: 40% revenue decline due to COVID-19, loss of major client, industry downturn, etc.].

I have been a customer in good standing since [year] and have always made payments on time until [date]. I want to continue honoring this obligation, but I need temporary assistance.

I am requesting [specific request: reduction of monthly payment from $X to $Y for 6 months, reduction of interest rate to 0% for 12 months, etc.].

I have attached [financial documents] showing my current business financial situation. I am committed to working with you to resolve this matter.

Please contact me at [phone] or [email] to discuss options.

Sincerely,
[Signature]
[Name]

Settlement Offer Letter Template

[Your Name]
[Address]
[Date]

[Creditor Name]
[Creditor Address]
Account Number: [XXXX]

Re: Settlement Offer

Dear Sir or Madam,

I am writing to offer a settlement on the above-referenced account. The current balance is $[FULL AMOUNT].

Due to [hardship/business closure], I am unable to pay the full balance. However, I have $[SETTLEMENT AMOUNT] available for immediate payment.

I offer to pay $[SETTLEMENT AMOUNT] ([X]% of balance) as payment in full, with the account to be marked "Paid in Full" or "Settled" and reported as such to all credit bureaus.

This offer is contingent upon receiving written acceptance of these terms prior to payment. If you accept, please send written confirmation to [address/email] within 10 business days.

If this offer is not acceptable, I may have no choice but to pursue bankruptcy, in which case you may receive nothing.

I look forward to resolving this matter.

Sincerely,
[Signature]
[Name]

Frequently Asked Questions