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August 15, 2023 Commercial Debt

Demystifying Commercial Debt: Understanding the Basics and Key Concepts

Commercial debt is something that most New Jersey businesses deal with at some point. Most companies need to take out loans in order to handle their operations, and many new businesses need funding to cover startup costs. Of course, banks and lenders in New Jersey also play an important role in this process, as they provide the capital that businesses desperately need to thrive and succeed. Commercial debt may take many forms, and it appears in various fields and industries. However, it always adheres to the same basic principles. By gaining an understanding of these principles and “demystifying” this daunting subject, your organization can approach commercial debt with greater confidence. 

Commercial Debt: The Basics

So, what exactly is commercial debt? As the name implies, this debt is held by a business rather than an individual. This is what makes it distinct from consumer debt. Once businesses acquire certain loans, they might use them for a wide range of endeavors – including:

  • Expansion 
  • Asset acquisition
  • Improvements
  • Starting a new business

For example, a farming company might need a loan to purchase a new piece of equipment. The logic is that the equipment will improve the business in such a way that the company can earn more money in the future and easily repay the loan.

Companies may also owe payment to other companies for certain services or products. For example, a social media marketing company might provide services to a company in New Jersey before sending them an invoice for these services. If the invoice is not paid, this becomes another example of commercial debt. 

How Much Debt Does the Average Business Hold?

According to various studies, the average small business in the United States holds about $195,000 in debt. This suggests that many New Jersey businesses may be struggling to stay afloat, and this obviously has the potential to cause a number of issues for both companies and their creditors. In addition, the average company takes about two or three years before it becomes profitable. This means that during these early years, new startups are operating at a loss or “in the red.” Even established, successful businesses operate in the red for much of the fiscal year – only becoming profitable during a few short months of high activity. 

What Happens if I Owe Commercial Debt?

If you owe commercial debt and you fail to make payments, you may face commercial litigation. However, there are various steps you can take to avoid litigation, including negotiations. You might also consider filing for bankruptcy. To establish a solid action plan based on your specific needs and circumstances, you may need to get advice from a qualified commercial debt attorney in New Jersey. 

What Happens if My Company is Owed Commercial Debt?

If you are owed money from another company, you can take various steps to collect the sums. Unlike consumer debt, commercial debt is not covered by the Fair Debt Collection Practices Act. This means that you will need to work with a collection agency certified through the Commercial Collection Agency Certification Program of the Commercial Law League of America. You may wish to negotiate with the debtor company for a repayment plan. This can help you avoid litigation. It may also dissuade the company from declaring bankruptcy, which can make it impossible for you to collect the debt. 

A commercial debt attorney can review the circumstances of your situation and determine the best route forward. These attorneys may examine any contracts your company has entered into. They may also determine the specific transactions involved, the existing terms of repayment, and alternative options for resolution. Ultimately, the only way to receive targeted advice based on your organization’s needs is to speak with a qualified attorney during a consultation. 

Where Can I Find a Qualified Commercial Debt Attorney in New Jersey?

If you have been searching for a qualified, experienced commercial debt attorney in New Jersey, look no further than Snellings Law, LLC. Ultimately, internet research can only get you so far when it comes to commercial debt. Although reading articles can serve as a positive first step, a consultation with a qualified attorney can provide you with more accurate guidance based on your specific needs and circumstances. Reach out today to learn more about commercial debt and get started with an effective action plan to tackle any issues you might be encountering in this area.