Keeping Small Business Out of Bankruptcy: What You Need to Know

When it comes to running a small business, it is going to begin as an uphill climb.  Many small businesses do not actually even record a profit for about three years.   About 70% of small businesses remain after two years and about 50% survive five.   Keeping your company out of bankruptcy is going to be vital to making sure your company stays above water. 

Start with Enough Cash

One way to ensure your small business avoids bankruptcy is to always have enough cash.  As obvious as it sounds, many small businesses will try to run their company on credit and this business model is not going to last long.  If your company is running on no money, it will cause a major distraction for you and keep you from advancing the company.  One way to do this is to ensure you borrow enough money when you get your startup cash.  Most small startups do not borrow enough money at the beginning of their business and this can come back to haunt them.   

Consult with an Expert

Another way that your small business can avoid bankruptcy is to hire an outside consultant who can bring in a fresh new idea to the company.  When you are the only manager around it can become difficult to constantly come up with new ideas for the company.  Hiring an outside consultant can be like a new beginning for the company.  These people are experts at assisting small businesses and have a plethora of information they would be able to share. 

Discipline Your Budget

Lastly, a major way to avoid bankruptcy is to decide how much money you would require for living expenses, bare minimum, and only take that from the company.  Do not try and live a lavish lifestyle with a giant house and multiple cars.  Keep yourself realistic on what the income your company has brought in and don’t live outside of your means.

Your business is your live so make sure you do everything you can to sustain it.  Cut cost where you can and maintain new ideas to keep your company out of bankruptcy. 

Can Corporate Debt Restructuring Help My Company?

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Let’s make one thing clear- corporate debt restructuring is NOT a magic-bullet cure for your organization’s financial problems. If your organization continues to take on more debt they can handle, if your company is unable to use their restructuring as a means of reaching profitability, and if your company approaches restructuring as a “get out of jail free card” then you will eventually run into the same problems you’re experiencing right now. That being said, for the majority of organizations corporate debt restructuring can be an intelligent step to take, one which will relieve the pressure of their debt load and provide them with the means of reaching sustainable profitability.

There are many ways in which debt restructuring can help your company, but an intelligent restructuring plan will have the greatest positive impact when it comes to improving your organization’s cash flow. There are many, many, many organizations in the world that are technically profitable but who aren’t able to achieve a high enough level of profitable cash flow to expand their operations. These organizations have excellent business models and are generally run in an intelligent manner, but most of their profits go right into debt repayment.

For these organizations, a debt restructuring plan will provide them with lower monthly loan payments, which will in turn provide them with the greater positive cash flow they need to grow and evolve as an organization. Without debt restructuring these organizations would stagnate, they would unnaturally remain in on position, and they would never achieve their corporate potential. With debt restructuring they can achieve a market position that allows them to comfortably pay off their debts in full.

The Ugly Truth about Business Bankruptcy

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Too many business owners believe as long as they avoid business bankruptcy they won’t have to worry about the health or reputation of their credit. They believe as long they restructure their debt they won’t suffer any of the negative side effects of their poor financial history. Unfortunately, this isn’t the case. The ugly truth about business bankruptcy is the fact it’s nothing more than the end result of a long line of actions which have already devalued your business’ credit.

Should you avoid business bankruptcy? Absolutely. A business which has gone bankrupt looks even worse than a business which merely fell into delinquency. But there’s nothing attractive about a business which fell into delinquency. The moment you are seriously considering credit restructuring it’s likely already too late to keep your credit looking good.

That’s the bad news. The good news is you can minimize the damage to your credit and make sure your suppliers will continue to work with you after you return to solvency if you work with the right professional representation. Hiring representation to negotiate with your creditors will help you arrive at a mutually beneficial restructuring plan, keeping your business operational and providing them with revenue they weren’t previously receiving. When you hire on an outside negotiating team you will also improve your relationship with both your creditors and your suppliers.

Regardless of whether you file bankruptcy or not, if you need to restructure your debt than your credit already sits in bad standing. The first step to rebuilding your credit is restructuring then repaying your debt.