I Went Into A Debt Restructuring Process!

A blog like this needs to be honest. Yes, that even your undergoing of a debt restructuring process, you have to reveal it so that your readers could grasp the message you’re sharing.

For those of you who have been following my blog since May 2019, you probably have noticed that the niche or tune of this blog have changed into something about money, debt, and wealth creation.

My ordeal in trying to grow a small business with no capital in a community that has so little purchasing power has come to its lowest point. Realizing that I am so weak, I turned to God by seeking His wisdom about money and wealth.

Fast forward today, August 2019, I finally received the help that I’m praying for. So, I decided to share the good news to my readers to inspire the struggling, and to keep up the faith. God is good all the time!

But before that, I’d like to first share to you my story, the start of my struggle, until I finally received the help I’ve been praying for.

The Dark Ages of My Life


I always wanted to start my own business, something that I can call my own. My parents were entrepreneurs, they were grocery store owners when I was just a kid. Perhaps, the spirit of entrepreneurship was passed on to me.

The problem is, I have quit my job to start my own pharmacy business prematurely…

My Pharmacy Business

And to start my own business, I borrowed money from loan sharks, at high interest rate. Then add to that, I wrongly thought that to save on overhead costs, I started the business in the first floor of our house here in our province, a country community south of the city of Manila.

You can imagine how a fledgling business struggle to stay afloat with low sales and vultures flying around feeding on its tiny profits. And to stay afloat, I borrowed some more thinking I would be able to recover and rebound with the high profit margin my products have.

But as we know it, if you fail to make money work for you, it can work in favor of your creditors and against you. The debts piled up, first to neck level, until it went over me!

I was drowning in debt.

The Truth About Business Loans


Loans from individual money-lenders plus and loans coming from financing institutions, we can combine them together and refer to them as “loans” for easy reference, although there is a big difference between the two groups.

Here in our place, there are three kinds of loans available for fledgling entrepreneurs:

  1. Loans from the banks – this kind of loan is the fairest of them all as it offers low interest rate (0.5% to 3% per month) and good terms. If you need money for your business, this is the most ideal to get money from BUT the hardest to get because of the strict requirements they put upfront.
  2. Loans from non-bank financing institutions – this kind of loan ranks second to the bank’s because of seemingly low interest (2% to 4% per month) rate BUT “more loose” requirement for the applicants. These include micro finance companies, lending institutions, and credit cooperatives.
  3. Loans from individual money-lenders – this is the easiest loan to get as they do not ask for requirements. Upon ocular checking of your store and inventories, they will give you money out rightly BUT with a super high interest rate (20% to 80% per month) and daily repayment agreement. Motorized collectors will come to your store daily.

Indian Loan Sharks

Thinking of the profit margin for the product at hand, one could easily think that they can make it even if charged with the highest interest rate. Like for example, for branded medicines in my pharmacy business, I have this profit margin of up to 40% while in generic medicines, it’s 50% to 80% depending on how good you are at sourcing for suppliers.

But make no mistake, because based on my experience, if you’re not careful with borrowing, you can have plenty of creditors you have to pay their share of the profits first before you can take yours. I’m speaking of the individual money-lenders, especially those lenders who will lend you money without specific time for repayment.

The worst debts are those without definite schedule of repayment—the lender will collect from you 20% per month interest from their capital indefinitely! So, it just work like you have brought on board a lazy business partner who knows nothing but collecting money from you.

In my case, I brought on board a dozen of them.

My Debt Restructuring Process


I have a well-off brothers and sisters, three of them are successful business owners. I think they are so lucky they have married boys who are financially well-off so they got a good start in business.

When they learned about my desperate situation, they first got angry of me. Together with my father, I received all kinds of reproofing words you wouldn’t want to hear. But I took them all anyway, because I understand it is a part of the process.

My younger sister who is the richer of them all, since she’s qualified for a bank loan, that loan with a very low interest rate and longer repayment terms, volunteered to borrow money for me. She borrowed money from the bank for the purpose of paying off my debts that have higher interest rates. But of course, I am the one who’s going to pay the loan.

Here’s a shot of the quote from the bank staff:

Bank Loan Quotation

The strategy is, with the big money from the bank, I have to pay off a dozen loan sharks (those charging 20% to 80% per month interest rate) and replace them with one big loan that charge only 0.75% per month interest rate.

And from terms imposed by the loan sharks of 30 days to 40 days, I will have to pay for this new loan on a monthly basis, for 3 years. Instead of having dozens of different smaller loans with high interest rate and tighter terms, I got relieved with a bigger loan that has a lower interest rate and expanded payment terms.

You know, the shorter the terms, the bigger the amount you have to produce daily or monthly for repayment. With the expanded terms, the monthly payment got reduced, and of course, thanks to the super low interest rate.

Conclusion


My battle isn’t over yet but at least, I got a sigh of relief.

We all make mistakes. If you happen to be in that position I’ve been, don’t lose hope. Pray to God for help and do your part. Look for people who can help you, look for solutions like a loan with lower interest rate and pay off those with higher interest rate. Then strive to eliminate debts one by one until you are free.

For me, I have set out on a journey of growing my business, growing my assets, with discipline and with guidance from God. I will just keep going and it won’t be long until I will experience more freedom with my life, freedom to live the life I want and in the service of the Lord.

Til next,

Gomer Magtibay

10 Comments

  1. Jordan Smith

    Debt restructuring I believe is one of several debt relief options people often use to pay off loans. Debt restructuring isn’t easy (I literally know what exactly you passed through, because I’ve being there once). Ideally, the terms of any debt restructuring deal should be advantageous, reducing the total of amount of monthly payments and/or the total amount of principal and interest to be paid over time. I’m glad you are more better than before. May God see you through Gomer.

    • Gomer

      Thank you. In short, for easy understanding, debt restructuring process should me repayment of debts easier or else the purpose is defeated. I’m glad that I have finally arrived in this situation where help is found. Thanks God.

  2. Dominic

    I love your transparency here Gomer, detailing your story and everything about your debt restructuring process. I’m sure putting up this post just makes you more accountable and more serious with recovering from the slump.

    If I remember, I mentioned back then that I also had a huge credit card debt which I’m struggling to pay off. And just recently, I created my own debt repayment program that I must strictly follow. Problem is, no one knows in the family that I have huge debt!

    For over a year, this has been putting a huge pressure on me to become creative with ways to pay it off. And admittedly, I’ll be prone to a financial crisis if I don’t do something soon. Anyway, may God always bless us in our journeys, I’m sure these struggles are just temporary.

    • Gomer

      Yes, I remember you mentioned about your own huge credit card debt. I can feel for you because, I know that if you ever fail to manage those debts properly, it can eat  you up alive. Don’t let that happen, you must act now, or if possible, tell your family about the challenges you’re facing. Who knows, someone in the family might also be willing to help you with a bail out.

      And don’t forget to always remember God. He’s there for us, we just need to come to Him and confide. Impossible may it seem, but if you put your trust in Him, sooner or later things will unfold on you how He’s working for you. He works for us covertly, but usually we fail to notice it. Trust Him, good things will come your way. Good things will come our way.

  3. Troy

    I have experienced something of this, not at such high rates, but high debt. I had a trucking business and my debt payments were such that I was payng my bills every week by writing checks and praying that money would come in before the check hit the bank. Eventually I  had several drivers that had accidents in quick succession and my revenue was cut in half but my bills were not. I survived,  barely,  but got out of the business, too much stress. I believe it is in Proverbs that it says that the debtor is the slave of the lender. Nothing could be truer.

    • Gomer

      Yes, it is true! The debtor is the slave to the lender. 

      Some of my readers here know that I am a Seventh-Day Adventist. Following what the Scriptures has said about how Sabbath should be observed, we ought to cease from doing business during Sabbath and dedicate the day for worship. But because I got debts to pay, I was forced to disregard Sabbath and work in my business instead.

  4. Chris

    Well I hear you mate – when I was younger I was a part-owner with my friend on a gardening business, that did really well at first. We thought the sky was the limit and decided to borrow money to put into the business, but this proved to be a big mistake.

    We tanked big style, and ended up with large debts we couldn’t run away from. 

    Luckily we had families that were willing to dip into their pockets and bail us out, but not everyone is that lucky…

    • Gomer

      Thanks for sharing your story! 

      Confidence and optimism is okay, but there are times that things we hoped don’t turn out as expected. It will always be good if we act but based on solid principles, information or gathered facts. Also, according to experts, we must always “expect to be disappointed”. Negative may it seem, but it is needed. It’s part of being a smart businessman, to always have a contingency plan.

  5. Hollie Rose

    Kudos to you for being so honest. Business is hard especially when you don’t have the support you need to begin it. That includes financial and emotional support. You’re lucky that you have a sister who was willing to help you, the way she helped you may not be what you ideally want but in the long run you still have your pride. I hope you are successful in growing your business:)

    • Gomer

      Some people have remarked, “Oh, that’s not free money. You still have to pay for it”.

      The help that I got from my sister may not be free money as we refer to it, but I am still thankful because, situation could be far worse if help like that wasn’t made available. Besides, it is very rare to be helped with a free money these days. Instead of seeing things on the negative perspective, I should be thankful someone came to the rescue. Now, it is my challenge to make the best out of this situation, and to turn my life around.

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