[COLUMN] Save your small business without declaring bankruptcy —
Running a small business can have its perks, even though it’s often an all-consuming endeavor. The owner often has to wear many hats – being a marketer, a manager, and yes, including the often most dreaded role of all – managing the finances of the business. The sad reality is that many businesses struggle, no matter how good things may look on the outside. According to the Small Business Administration, 50% of small businesses in the first 5 years.
I once had a client who owned a restaurant that I personally frequented. Every time I went, the place seemed crowded and busy, and there was usually a long wait to be seated. When the owner came to me one day about the business’ debt problems, I learned that the business had been in the red for over 3 years and was simply surviving on loans to keep going. to work! He hadn’t paid himself a salary in years just to keep the business afloat, so essentially he had been working without pay and to make matters worse, the company’s debts kept growing. It’s not uncommon, what you see isn’t always what you get.
Many companies find it necessary to take on debt to finance their operations through bank loans, lines of credit and even credit cards. When servicing these debts becomes difficult based on the incoming revenue of the business, repayment becomes difficult, if not impossible. And as you know, money is the lifeblood of any business. Once you run out of money, you are virtually bankrupt.
Filing for bankruptcy is the last option for business owners and quite often, usually reserved for the moment they realize their business is no longer viable. Sometimes that’s the smartest thing to do – cut your losses instead of throwing money at a business that has become more of a liability than an asset. Some owners offer bad solutions to “fix” the problem. They think that if they spend more money on marketing, more staff, etc., or if they keep borrowing money to “grow”, things will somehow improve. another one. But this is rarely the case if the business is not profitable for other reasons. I know this may sound simple in theory but difficult in practice: a business must spend less than it earns to be profitable. None of the “solutions” owners have in mind can correct the miscalculations.
Debt restructuring and settlement with creditors can be a good alternative to bankruptcy if it can ease the financial burden on the business and help cash flow. For example, the interest rate may be reduced, the term of the loan extended, payments temporarily suspended, or settlement may be made for less than the full amount of the debt. All of the above is likely to be less expensive, longer and more difficult than declaring bankruptcy or facing lawsuits from creditors.
Whatever the reasons for your business’ financial difficulties, if you cannot pay your creditors, it is only a matter of time before you run the risk of losing what may be the only source of income for your family. Dealing with problematic business debts can be stressful, especially if you have personally guaranteed the debts as the business owner, as creditors can also sue you personally if the business fails.
Be proactive and take the time to explore your options before it’s too late. Restructuring and debt settlement isn’t always possible for every business, but when it is, it might just be what you need to save your business. Consult with a knowledgeable debt relief attorney who can review your business finances and cash flow and see if this may be the best solution for the long-term financial well-being of your business.
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None of the information contained herein is intended to provide legal advice for any specific situation. Atti. Ray J. Bulaon has successfully helped over 6,000 clients get out of debt. For a free evaluation of your situation by an attorney, please call RJB Law Offices toll-free at 1-866-477-7772.