Debt restructuring for the self-employed is one of the most complicated lending operations at the bank. Keep in mind that security mechanisms such as protection against dismissal or long-term payment of unemployment benefit I often do not work and that the self-employed person often has a fluctuating income. Read more about why debt restructuring for the self-employed needs a close look and an honest calculation:
Fluctuating revenue structure in many industries
Lending for a permanent position is relatively simple in comparison: The proof of income, for example in the form of a pay slip, shows the monthly purchasing power available. This is much more difficult for the self-employed: Here either the business evaluations of the tax consultant or the advance sales tax payments can be used as a basis for information! However, there are many industries starting with the construction industry to catering to tourism companies that do not generate even income
Here, an average of the main season and low season must be expected. Another challenge is the correct calculation of the monthly installments: Should the loan be paid evenly in monthly installments or should the repayment not begin until the third month of the main season, for example?
In these cases, the classic amortization loan or installment loan is not suitable for rescheduling as the repayments should be able to adapt to the cash flows! When rescheduling for the self-employed, particular care must be taken to ensure that the repayments or expenditure flows do not precede the income flows. Otherwise additional interim financing would be required.
The reason for the debt restructuring should play a role in lending
Especially in the current but very volatile economic environment, the cooperation between the bank and the self-employed should be characterized by trust and mutual information! Debt restructuring for the self-employed is much easier to negotiate and carry out if the corporate account manager knows the exact reason for the debt restructuring. Is it just saving interest and adjusting the credit structure to more favorable terms?
Or would the self-employed prefer to pay back investments already made in the longer term in order to have more air for the company or their own consumption? These factors not only play a role in the interest calculation, but also influence the available options for action. So go with the information on lending what the real purpose of the debt restructuring is.