The Money Is About To Run Out – Things To Try Before Filing A Business Bankruptcy
Even before the COVID-19 pandemic, businesses sometimes struggled to make ends meet. Economic downturns and shifts in consumer needs can create a temporary cash-flow problem. Most businesses had capital they could use to get through the tough periods. However, many businesses have depleted those resources during the coronavirus pandemic.
Business Bankruptcy Options
Some business owners are turning to bankruptcy to help reorganize their debts. Business entities can file under Chapter 7 or Chapter 11 of the Bankruptcy Code.
Chapter 7 cases are liquidation bankruptcies. When a business entity files Chapter 7, a bankruptcy trustee assumes control of all business assets. The bankruptcy trustee may operate the business for a short time, if it is in the best interest of the creditors. However, in most cases, the Chapter 7 trustee liquidates the business assets to pay creditors.
A Chapter 11 bankruptcy is a reorganization. The business remains in control of its assets and continues to operate the company. The company proposes a bankruptcy plan to restructure its debts so that it can afford to continue operating. Because Chapter 11 is costly, time-consuming, and complicated, many small business owners do not seek bankruptcy relief. However, with the passage of the new Chapter 11 Subchapter V, Congress has made it more affordable for small businesses to file for Chapter 11 relief.
Things To Try Before Filing a Business Bankruptcy
Before you leap into a Chapter 7 or Chapter 11 business bankruptcy, you may want to consider other options.
Talk to a Financial Advisor
If you have a financial advisor, now is the time to call your advisor. Your financial advisor may have suggestions for ways that you can avoid bankruptcy that you might not think of yourself.
Call Your Lender
There are numerous programs for small businesses that provide low-interest loans to help overcome a financial crisis. The Small Business Administration and the Florida Small Business Development Center have information about assistance for businesses impacted by COVID-19. Your company may qualify for one or more loans or programs that can help you keep your doors open until business returns to normal.
Contact Your Creditors
You might be able to negotiate lower payments and interest rates by contacting your creditors. Most creditors understand that businesses are struggling. They may prefer to work out some type of arrangement to restructure the debt instead of fighting for whatever they can get through a bankruptcy case. Discuss restructuring debts with all creditors, including leaseholders, credit card companies, venders, banks, and other lenders.
Review Your Expenses
It is time to cut overhead and tighten the belt. Take a close, hard look at your expenses to determine what you can do without. You might be surprised by how much money you can save each month after a careful analysis of your books. Your accountant and financial advisor might be beneficial during this process.
Review Your Assets
If the company has assets that it no longer needs, sell them. You free up space and bring in money. However, you may want to check with your tax advisor first to determine if the sale of assets could create a tax liability.
Search for Alternative Suppliers
Shop around for suppliers who offer the best terms and prices. Analyze your inventory to determine how much you need on hand. Now is not the time to stockpile supplies that you may not use for six or more months.
Streamline and Automate
Cut as much of your workload as possible to decrease overhead. If you can purchase software to automate bookkeeping, you might be able to lay off the bookkeeper. Laying off workers may not be what you wish to do, but laying off a few employees can keep from closing the business, causing everyone to be out of work.
Contact Our Florida Business Law Attorney for Help
Businesses are struggling right now. However, you may have more options than you realize. The above list is just a sample of the things that might help you avoid business bankruptcy.
Contact Attorney Matthew Fornaro by calling 954-324-3651 or contact us online to schedule a consultation. As an experienced Florida business law attorney, he can help you weigh your options and develop a business plan that gives you the best chance of achieving your goals.