Company Debt Management Plans Explained: Your Comprehensive Guide

You might be running a business where debt begins to limit your operations. Payments to vendors slow down, cash flow feels tighter each month, and the pressure starts to affect day-to-day decisions. That reality is far more common today. According to the Federal Reserve’s latest data, 39% of firms carrying more than $100,000 in debt remained above prepandemic levels. That highlights how many businesses are managing heavier financial burdens.

As those obligations mount, many owners begin looking into structured options, and that's when you may come across a term like a company debt management plan. It offers a viable, structured alternative to letting debt spiral out of control.

This guide breaks down how these plans work, what they include, when they make sense, and how they help you stabilize operations and regain control.

At a Glance

• A company debt management plan organizes unsecured debts into a single monthly payment while seeking to reduce interest charges.
• Enrollment involves working with a certified credit counseling agency. They review your finances, negotiate with creditors, set up a payment schedule, and require closure of included unsecured accounts.
• DMPs offer lower interest, predictable payments, and no credit score requirement, but they also involve program fees, account closures, and a multi-year commitment.
• Credit impact varies: short-term dips may occur when accounts are closed, but consistent payments and full repayment can strengthen your business credit profile over time.
• Alternatives include consolidation loans, settlement, restructuring, and bankruptcy. Each fits different cash flow levels, timelines, and financial goals.

What is a Debt Management Plan?

A debt management plan (DMP) is a structured repayment program designed to help you pay down unsecured debts without taking out a new loan. A DMP brings your eligible debts into a single predictable monthly payment.

A professional credit counseling agency coordinates a DMP. They review your financial situation, work with your creditors, and, when possible, arrange lower interest rates. Most plans run for three to five years, offering a steady, organized path toward becoming debt-free.

DMPs generally apply to unsecured personal or business debts, not to secured obligations such as mortgages or other asset-backed loans.

Example: If you run a small contracting business and have several unsecured loans for equipment and vendor costs, the monthly payments may feel overwhelming. A debt management plan combines your debts into a single monthly payment and seeks lower interest rates, giving you a more straightforward path forward.

Also Read: Top 10 Effective Strategies for Managing Business Debt

To decide if a DMP is right for you, it’s essential to see what joining one looks like from start to finish.

How to Enroll in a Debt Management Plan: Key Steps

Getting into a company debt management plan begins with working through a certified credit counseling agency. These organizations, often nonprofit, provide financial education, counseling sessions, and structured debt repayment programs at low or no cost.

Step 1: Connect With a Reputable Credit Counseling Agency

You can find trusted agencies through well-known organizations such as:

• National Federation for Credit Counseling (NFCC)
• Financial Counseling Association of America (FCAA)

These directories help you identify agencies that follow industry standards and offer certified financial counseling.

Step 2: Complete a Credit Counseling Session

Once you schedule a session, a certified counselor reviews:

• Your current business revenue
• Monthly expenses
• Total unsecured debt
• Existing repayment obligations

After evaluating your situation, the counselor may suggest a company debt management plan if it aligns with your budget and long-term goals.

Step 3: Enrollment and Creditor Negotiation

If a DMP is recommended and you choose to move forward:

• The agency enrolls your eligible unsecured debts.
• A counselor contacts each creditor to explain the plan.
• The agency requests interest rate reductions or fee waivers.
• A single monthly payment amount is set based on your budget.

Step 4: Understand the Fees

Most agencies charge the following fees. However, even with these fees, your overall monthly payment is usually more manageable.

Step 5: Make One Monthly Payment

Once enrolled:

• You send one monthly payment to the counseling agency.
• The agency distributes the funds to each creditor on your behalf.
• You'll receive a consolidated monthly statement showing progress.
• You must close any unsecured accounts included in the plan.

However, if coordinating lenders or negotiating new terms feels overwhelming, Shepherd Outsourcing Collections can handle creditor outreach for you.

With the enrollment steps covered, let’s break down the pros and cons to help you make an informed choice.

Weighing the Pros and Cons of a Debt Management Plan

A debt management plan offers a structured way to handle unsecured debt, but it isn’t the right solution for everyone. Understanding both sides helps you decide whether this approach fits your financial situation and long-term goals.

Benefits

• Reduced Interest Rates: A counselor may be able to work with your creditors to bring interest rates down. This allows more of each payment to go toward the principal.
• Single Monthly Payment: Rather than tracking multiple due dates, you make a single, organized payment each month through the counseling agency. This reduces the chances of missed deadlines.
• Improved Credit Health: Consistent, on-time payments throughout the program can help strengthen your credit profile over time.
• No Credit Score Requirement: You can start a DMP regardless of your current credit standing, since it isn’t a loan and doesn’t require a new application.
• Faster Repayment Timeline: Many DMPs are completed within 24–60 months, giving you a quicker route to repayment than paying each loan separately.
• Less Pressure to Borrow: Because unsecured accounts in the plan are closed, you’re less likely to take on new debt while enrolled in the program.

Limitations

• Requires Account Closures: Any unsecured loans included in the plan must be closed, which may feel limiting if you’re used to having access to open accounts.
• Monthly Program Fees: You’ll pay enrollment and maintenance fees to the counseling agency, which are separate from your debt payments.
• Limited to Unsecured Debt: Secured loans cannot be included in a DMP.
• Long-Term Commitment: The plan requires steady payments for several years, which may feel lengthy if your revenue fluctuates.

If these limitations are challenging for your business, Shepherd Outsourcing Collections can assist. Our experts can review your situation and help you decide the repayment approach best suited for your operations.

As you evaluate your options, it’s essential to look at what a DMP means for your credit health over time.

Does a Debt Management Plan Affect Your Company Credit Score?

A company debt management plan can influence your business credit profile in several ways, but the impact is not as damaging as many people assume. A DMP is not listed as an adverse event in credit scoring models, though creditors may note on your reports that the account is being repaid through a structured plan. Your credit score changes depend on your payment activity, account status, and overall debt levels during the program.

How a DMP Can Help Your Credit

• More On-Time Payments: If your past-due accounts are brought current as part of the DMP and you continue making on-time monthly payments, it strengthens your credit profile.
• Accounts Marked as Paid as Agreed: Since a DMP focuses on full repayment with adjusted interest, your credit reports show that the accounts were paid in full. This is preferable to having debts marked as “settled,” which may carry negative associations.
• Reduced Overall Debt: As your balances shrink, your reports reflect lower outstanding debt and improved credit utilization. This supports healthier credit behavior over time.

How a DMP May Temporarily Lower Your Credit Score

• Closed Accounts Reduce Available Credit: Any unsecured accounts included in the DMP must be closed. With less available credit, your credit utilization ratio may increase, which can bring your score down in the short term.
• Creditor Notations: Some creditors may note that an account is under a repayment plan. While this notation does not directly lower your score, lenders reviewing your report may interpret it as a sign of financial strain.

Key Insight: A DMP doesn’t damage your credit; inconsistent payments do. If you make steady monthly payments throughout the program, the positive history often outweighs the short-term effects of account closures.

Also Read: The Hidden Factors That Affect Your Credit Score and How to Improve Them

With the credit impact clarified, it’s essential to assess whether a DMP aligns with your business needs and objectives.

Is a Debt Management Plan Suitable for Your Business?

Evaluating a few key factors can help you understand whether a DMP aligns with your cash flow, goals, and current financial challenges. The following questions clarify its suitability.

1. Do you have steady business income? A DMP requires consistent monthly payments. If your business revenue is unpredictable or too low to cover basic operating needs, a plan will likely put unnecessary strain on your budget. However, suppose your business generates stable income but struggles to keep up with several unsecured loan payments. In that case, a DMP may help you stay on track.

2. Have you fallen behind on payments? Missed payments don’t usually disqualify you from a DMP. There are no credit score requirements, and many creditors may bring past-due business accounts current after you make consistent payments through the plan. This is helpful for small businesses recovering from downturns, slow seasons, or unexpected expenses.

3. Are high interest rates limiting your progress? Many business owners feel stuck because interest charges wipe out most of their monthly payments. A DMP may help lower those rates. This often enables you to repay within 3 to 5 years, rather than letting interest accrue indefinitely.

4. Is improving your business credit a priority? If your business credit profile has already taken hits from late payments or high balances, a DMP may help. It lets you rebuild your credit score over time.

5. Do you need ongoing support and accountability? If your business needs guidance, regular check-ins, or help staying disciplined with repayment and budgeting, a DMP provides structure.

6. Are you planning a major business investment soon? When you enter a DMP, unsecured accounts included in the plan are typically closed. Since account history contributes to your credit profile, this can result in a short-term dip in your business credit score. If you intend to apply for new equipment or vehicle financing or to expand in the near future, delaying enrollment in a DMP would be wise.

If any of these factors make a DMP less ideal, you still have several alternatives worth considering.

Alternatives You Can Consider

Also Read: Debt Cancellation and Taxes: What You Can Do to Minimize the IRS Bill

Final Thoughts

A company debt management program offers predictable payments and consistent progress. However, it’s most effective when your income is steady, and you value ongoing guidance. Understanding whether a DMP aligns with your cash flow, upcoming financial plans, and overall goals ensures you choose a repayment path that supports long-term stability.

Shepherd Outsourcing Collections strengthens this process by assessing your debt, negotiating directly with creditors, and managing one monthly payment on your behalf. With structured support and clear communication, we help you move from financial strain toward full repayment and a healthier financial footing.

If your company is struggling with unsecured debt or feeling pressure from lenders, consider availing our services. Talk to our experts to identify whether a DMP is the best fit for your situation.

FAQs

1. Will suppliers or partners know our business is enrolled in a DMP?

Creditors involved in the plan will be notified, but suppliers, vendors, or customers are not automatically informed. Most businesses complete a DMP without affecting external relationships.

2. Can we include merchant cash advances in a DMP?

Some MCAs qualify, but it depends on the lender’s policies. Many MCA providers are not traditional creditors and may decline restructuring requests. That's why agencies review each account before confirming eligibility.

3. Can we still negotiate directly with creditors while enrolled?

Not typically. Once you’re in a DMP, communication goes through the counseling agency to keep terms consistent. Direct negotiation can cause conflicting arrangements, so it's handled centrally unless a creditor requests owner involvement.

4. Are tax implications involved in completing a DMP?

Unlike a settlement, a DMP doesn’t involve forgiven debt, so there’s usually no taxable “cancellation of debt income.” However, if creditors waive specific fees, your accountant can advise whether any reporting applies.

5. What happens if our business revenue drops during the program?

If revenue decreases, the counseling agency may reassess your payment schedule. Some creditors may allow temporary adjustments. Early communication is essential to avoid defaulting on the plan and losing negotiated terms.