Don't make excuses or get emotional; stick to the facts.
Writing an effective financial hardship letter is the critical first step in opening a line of communication with your lender. Keeping it succinct, factual, and logical helps your lender work with you through a difficult time. Remembering to provide a solution to the problem that benefits both parties allows the lender to take your request seriously.
Instructions
Preparation
1. Verify lender contact information, including the name of the person you need to reach, along with his address, fax and telephone numbers.
2. Review the business's cash flow and estimated future income. Analyze the current loan and devise an alternative repayment plan. For example, extending the term of the loan may make payments manageable.
3. Make a copy of your proposed repayment plan and documentation that proves the hardship, including cash flow, balance sheet, and contracts that prove your ability to make the new, proposed payment.
Writing the Letter
4. Put the name and address of the lender at the top, with the date and your business name and account number written clearly beneath it.
5. Use the first paragraph to briefly explain the problem. For example, "I am writing because I am having difficulty repaying my loan to you and I would like to negotiate a new payment arrangement."
6. Use the second paragraph to describe succinctly and without excuses the events that caused you difficulty. An example would be: "My own business has suffered since the economic downturn. Once-reliable accounts have become delinquent, and as a result, my business is now behind on its own bills."
Have documentation that proves your claim, such as canceled contracts or an account aging report.
7. Use the third paragraph to propose an alternate solution. For example: "However, business has begun improving and although I am still catching up, I am able to repay your loan at 8 percent interest over 10 years."
Add a note that describes the additional profit or benefit the lender will earn from revising your terms. Don't forget to include new business or an improved aging report that shows how clients are catching up on payments.
8. Review the letter, attach any documentation and sign and send it with delivery confirmation. You may wish to fax it, as well; just save exactly what you sent in hard copy and electronic formats.
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