HIGHLAND PARK , IL , December 4, 2006 � Should companies with debt and cash-flow problems turn to debt consolidation, as so many consumers have in recent years? Or is there another, possibly better option for these businesses?
While owners of debt-burdened firms might think debt consolidation is their best�or only�alternative to bankruptcy, there is much more to know, says Jim Herst, president of Performance Source Inc (PSI), a leading debt-settlement firm serving closely-held companies nationwide since 1963.
�For many business owners, collaborative debt settlement�PSI�s unique approach to solving commercial debt�makes far more sense financially than debt consolidation or other services advertised as debt management.�
PSI actually reduces a company�s debts by as much as 80% by negotiating with each of its creditors one by one. No borrowing occurs. In contrast, Herst notes, consolidation gives the client a single monthly payment for all its debts�but no reduction of the debts�with a longer repayment term, including interest. As a result, he says, the debtor can end up paying as much as twice the amount they owed before starting the consolidation program.
A key question the debtor should ask is how a debt-management firm earns and collects its fees. �Because PSI�s fees are based solely on the dollar amount of debt savings we achieve for our clients, we don�t collect a fee until after we have done our job,� Herst says. �We get paid only for performance�hence our name.� With debt consolidation, however, the client�s first two or three payments usually are kept by the consolidator as account set-up fees, rather than paid to creditors. Meanwhile, interest and fees can continue to accrue on the client�s unpaid balances.
In lieu of account set-up fees, new clients of PSI make a refundable deposit of $500. The deposit is returned in full to the client after all debt settlements are made for the client.
The issue of monthly payments is another important difference. �PSI does not require monthly payments,� Herst explains. �Instead, we open an interest-bearing bank account in the client�s name and ask that they use it to gradually build, and then maintain, a refundable balance equal to 20% of their outstanding debts. This money is for paying the client�s creditors, but PSI never touches it without the client�s written approval of each debt settlement we propose.�
In contrast, most consolidators�after taking the client�s first few payments as set-up fees�keep a percentage of each monthly payment before disbursing funds to the client�s creditors. �Some consolidators and debt managers actually base their monthly fee on the amount of debt or the number of creditors a client has,� Herst notes. �At PSI we don�t believe in penalizing our clients like that.�
He adds that because consolidators� fees are non-refundable, companies in debt should consider this statistic: Approximately 75% of consumers who start a personal debt-consolidation program never complete it, leaving themselves with unpaid balances Herst concludes, �PSI�s debt-settlement service is designed for companies looking to stay in business and strengthen their balance sheets. Consolidation is primarily for consumers who simply need one payment per month for their debts, and an end to collection calls and letters. Of course, PSI stops the calls and letters for our clients too.�
About Performance Source Inc.
Since 1963, Performance Source Inc. (PSI) has helped small businesses nationwide improve their cash flow, and in many cases avoid bankruptcy, by negotiating with their creditors to reduce their business debts by as much as 80%. PSI has helped thousands of clients save tens of millions of dollars and satisfy their creditors without borrowing additional money. Under the company�s risk-free process, clients decide which payables they want PSI to negotiate, they approve (or decline) all proposed settlements in advance, and owe PSI nothing if a settlement is not reached or not accepted. And because PSI also handles all contact with clients� creditors, clients are able to focus on growing their businesses. For more information about PSI, please call 800/883-5080 or visit www.performancesourceinc.com. Performance Source Inc. is not affiliated with Performance Source II, Ltd.