Debt Mediation: How It Can Save Your Business
If your business is owed money, there can be many reasons that money is not yet repaid.
For example, the borrower might not want to pay the money back or have the resources to repay.
The reason for the lack of repayment is also a debt-related dispute. A debt dispute between a business and a customer might include disputes regarding the repayment amount, the product they received, or the service cancellation terms.
In short, many disputes between the parties can spill over into debt repayment and might stop the repayment process.
The “Won’t Pay” Scenario
If the customer refuses to pay the business, it is highly unlikely that this process can benefit significantly from mediation. So, in this situation, the business should look for some other means to make their customer repay.
A dispute does not cause this, and a mediator cannot help you.
Some businesses might choose court proceedings, but that also means paying a lot of court fees and wasting time while tarnishing your business’s image. Since the litigation process can take years to complete, businesses should focus on spending the same resources somewhere else.
The “Can’t Pay” Scenario
On the other hand, if the customer says that they “can’t pay, ” this scenario can benefit by involving a mediator. With the help of mediation, the business can help the customer open up about any monetary or non-monetary options they might be willing to use to repay the business later. This way, the relationship between a business and its customers can flourish while the mediator sorts out the debt issues.
How Can A Mediator Help?
Whenever there is a disagreement on debt repayment between a business and its customer, the mediation process can help both parties achieve a peaceful conclusion to the conflict.
However, to make the mediation process fruitful, the parties should understand that they are going into mediation to find a peaceful resolution to their conflict.
The mediation process should be balanced, and both parties should be given equal opportunities to express their concerns. This way, a peaceful conclusion can be reached which takes care of the fundamental rights of the parties involved in the dispute.
In the case of commercial disputes, the mediator listens to both parties, and issues are legally binding orders that the parties must follow within the given time frame. In the case of debt settlement, repayment terms are discussed and included in the final verdict.
Benefits Of Mediation In Debt-Related Disputes
Mediation brings many benefits to debt-related disputes between businesses and customers. Some of the most significant benefits of mediation in these cases include, but are not limited to:
- Sped up mediation process and timely dispute resolution.
- High rate of success and predictability.
- Much lower costs as compared to litigation.
In the case of litigation and court action, the case will take months to resolve, and even then, it might not be mutually beneficial for both parties. At the start, the judge might also suggest the parties go through mediation to try alternative dispute resolution. This will delay the case even further.
Even if the case reaches a judgment, there is still no guarantee of repayment by the customer. In this case, the business will have to get an enforcement order from the court, which will also increase costs in the long run.
On the other hand, when mediation is chosen over litigation, the parties can sit together even for the whole day before reaching an agreement. The day might be boring, but the ultimate goal of both parties would be to reach an agreement and settle the debt dispute once and for all. Mediation has a very high chance of success, and it also restores communication between the disputed parties, which significantly helps a business retain its customers in the long run.
If, even after mediation, the settlement does not include 100% repayment by the borrower, the business will still be happy to recover most of the amount since it is still very faster and more cost-effective as compared to litigation. While litigation might help the business recover 100% of the repayment amount, the involved costs are also great and significantly decrease the whole process’s efficiency.
In many cases, the amount the business recovers through litigation is even less than the lawyer and court fees combined. So, mediation is always the better choice regarding business debt issues.
Mediation In Commercial Debt
Commercial mediation is one of the best ways for businesses to settle disputes with their creditors. A neutral third party or a mediator is engaged in the process to help the parties settle their differences and find a common middle ground. Unlike litigation, in which the power of the final verdict is in the hands of a judge, mediation gives the power back to the disputed parties. It helps them achieve a reasonable conclusion without suffering from a legally binding judgment from the court.
The benefits of commercial mediation include, but are not limited to:
- A flexible mediation process in which both parties can keep working normally while participating in mediation sessions.
- The process is confidential, and the business details are always kept private.
- The relationship between a business and its creditor or a business and its customer can be preserved perfectly with the help of mediation.
- When compared to litigation, mediation is way faster and cost-effective as well.
- The parties can also participate in the settlement discussions and have equal time to express their concerns before reaching an agreement.
So, commercial mediation is always the best way for businesses, whether they’re looking to settle their disputes with their creditor or customers who can’t repay the borrowed amount.
