Payable Restructuring: Why Your Business Won't Go Bankrupt

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Business bankruptcy may feel inevitable when you face a huge mound of debt payments draining away your potential profits and preventing you from building the infrastructure you need to reach a favorable market position. Yet business bankruptcy is not inevitable, provided you take the right steps. And one of the best steps you can take to prevent business bankruptcy is restructuring your account payables.

Why will a simple restructuring of your accounts prevent your business from going under? When you restructure your accounts intelligently you will be able to create positive cash flow where previously you only saw red. Restructuring your account payables will reduce the size of the monthly liabilities preventing your company from achieving profitability. And one of the most common reasons why businesses go bankrupt lies in a lack of profitability and a lack of positive cash flow due to an overwhelming number of regular debt payments.

The key to avoiding business bankruptcy lies in being able to make all of your payments and financial obligations every single month. By restructuring your business debts you will be able to make sure your monthly financial obligations are always manageable, no matter how large of a debt underlies them.

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.

Should You Negotiate with Creditors on Your Own?

Negotiating with a creditor is all but guaranteed to be a nerve-wracking experience. Even if you find yourself represented by a highly qualified and experienced professional team it’s natural to feel anxiety when the stakes are often as high as the future of your business. These anxieties will only multiply manifold if you decide you’re going to negotiate with your creditor on your own. In general negotiating with creditors on your own is a bad idea, but there is a crucial factor which can make the process worthwhile and successful- and it’s not what you think.

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The only time you should negotiate with your creditors on your own is if you are able to do so without emotion. Most people believe that a thorough understanding of all the legal and accounting ins & outs of their loan will be their best asset during negotiations, but all of that knowledge and know-how will do you know good if you can’t keep a cool head during the deal’s proceedings.

At the end of the day most people aren’t able to negotiate dispassionately with their creditors when the future of their company is at stake and should never try to tackle the process on their own. While the professional expertise, the convenience and the experience offered by a successful legal firm are all highly beneficial during a negotiation, it’s your professional representations emotional distance from your case which makes them such an essential hire.

The Amazing New Secret of Restructuring Business Debt

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You’d be hard pressed to find a business which didn’t take on significant debt to either form or to grow during a critical stage of its development. Many of those businesses will eventually find themselves unable to pay off these loans according to their original terms and find themselves needing to restructure their business debt in order to stay solvent and to produce a business plan which will allow for future profitability. While reducing your operating costs in order to lower overhead and generate extra cash to pay off your debts is a valid response to insolvency, there is a secret which allows you to restructure your business debt without freeing up or generating any extra income.

Many companies have been able to negotiate with their creditors to exchange a chunk of their business debt in exchange for equity in their company. Essentially a businesses’ creditors will “buy in” to the company which owes them money, purchasing a stake in their future through the alleviation of already extended credit.

If you are planning on restructuring your business debt through this method you MUST work with experienced and qualified professionals to make sure you don’t accidentally provide your creditors with a controlling share of the business in the process. If you and your professionals craft the proposal intelligently and carefully you will be able to trade debt for equity, restructuring your business debt without losing control over your company and without having to immediately generate addition cash.

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Accounts Receivable Factoring

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Many companies are choosing accounts receivable factoring as a way of restructuring their organizations, increasing cash flow and improving their financial statements. If you own a company, and feel a cash crunch, accounts receivable factoring might be right for you.

Accounts receivable accounts are debts that your customers owe and are often called receivables. Accounts receivable factoring works by selling your accounts receivable accounts and balances to a financial organization, or investor, who is willing to purchase them. When this occurs, you sell the balances at a discounted amount, and receive immediate cash for them. An investor is likely to use a certain percentage as a way of calculating what these debts are worth.

Investors choose to purchase these receivables, because of the future value they have. Organizations are often willing to sell these collectibles at a discount, by thinking of the fee as a cost of generating revenues and cash.

One primary purpose for using accounts receivable factoring is to improve your cash flow. Businesses with little or poor cash flow often suffer problems continuing their operations. By using accounts receivable factoring, you will improve your cash flow. You will not have to wait to collect these accounts, and you give the burden of collecting them to a third party.

A common alternative to accounts receivable factoring is taking out a loan. Many people are opposed to this, because with a loan, you will pay interest on the borrowed money; which can often amount to more than what a company will purchase the accounts for. In tough economic times, you might not even be able to obtain a loan, and if you do, the loan rate might be extremely high. Another reason why you should choose factoring over a loan is the effects on your company’s financial statements. A loan increases your liabilities on your company’s balance sheet, while factoring swaps one asset for another. So before your company experiences cash flow problems, consider accounts receivable factoring.

Corporate Tax Help

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 All businesses have one common concern, their corporate tax code. Before 1908, no American businesses were taxed at the federal level. Now, they’re hit with a rate of over 39 percent, as the United States corporate tax rate is the highest behind Japan. Government leaders want to simplify and eliminate the tax loopholes, so they can treat each corporation fairly.

Here are some tips for corporate tax:

Deducting Business Expenses

The true definition of a business expense is the cost of handling the everyday practice of a business. These expenses are eligible for corporate tax deductions, especially if the business is expected to make a profit. To be considered deductible, your expense must be commonly recognized in your industry. Some call this a necessary expense that is very helpful to the business. Some expenses don’t have to be indispensable to be considered necessary. It’s very important they you separate your business expenses from your own personal expenses.

Updating Your Paperwork

It’s very important that you continually update your paperwork, as failure to do so could hurt your corporate standing and your eligibility for legal tax shelters. If your paperwork is in order, then those rental real estate losses are suddenly eligible to be suspended and you can pay the taxes at a later date. You can prove this by showing your income is too high and your profits are classified as income.

Partnership

There is a wide assortment of business partnerships, and they all have different corporate tax codes. General partnership has no limited liability, as all income is eligible for Social Security tax. Each partner reports their share of the profits on their own tax returns. To be considered a limited partnership, you must have one or more general partners and one other limited partner in the corporate agreement. Each partner must report their share profits separately on a tax return. General partners must pay Social Security tax, while limited partners aren’t required to pay.

Lowering Your Tax Rate

Leaders of a corporation can decide to be taxed as one and become a tax shelter for their owners. Most cases, the first $50,000 of taxable income are taxed at 15 percent, and then the next $250,000 can be withheld as accumulated earnings. The corporation should be part of a group partnership, as lower tax brackets and retained earning exemption can be shared equally among the group.