Venturing into a new business has never been more thrilling. The startup economy is endowed with opportunities, innovation, and potential. But at the same time, new startups are fraught with high-stakes risks. At times, these risks lead companies into situations of financial difficulty. As debt accumulates and vendors end up with unpaid dues, most business owners just throw in the towel.
It explains why tens of thousands of companies file for business bankruptcy each year. Usually, they do this with the hope that they will receive some form of financial protection. In reality, declaring bankruptcy is not as simple a process as it appears to be. If your business has been grappling under a mound of debt, bankruptcy is not the only solution. This article examines the best alternatives to declaring business bankruptcy.
Making Operational and Business Changes
Filing for bankruptcy is usually the last resort for the majority of organizations. Luckily, you can still salvage your firm by making a couple of operational and procedural adjustments. For instance, you can opt for short-term financing to handle your current cash flow shortages. This way, you will still have funds for conducting routine operations, while gathering money owed to your firm by clients.
Alternatively, you can use an independent investor or relative to help finance operations in the short term. Also, you can cut down on minor business expenses to avoid bankruptcy. You could reduce your management and employees’ wages or sell non-performing assets. If you own property or other assets that are not adding any economic value to your firm, sell it immediately.
Finding short-term financing solutions and cutting back on expenses can help to keep your business going. But, they are not ideal solutions for staving off bankruptcy. As such, consider negotiating with your creditors. If you can come up with a financial arrangement that suits both your company and the creditors, this will be significant progress.
One option is to request for adjustments in the loan terms or payback duration. Doing so not only helps to minimize the negative cash flows but also keeps you out of the court system. Nonetheless, take note that the workout agreement can reduce the current business credit rating.
Seeking Expert Consultants
A saying goes that no one individual can whistle a symphony; it calls for a whole orchestra to play it. Similarly, getting off your financial crisis may necessitate to bring in new people- financial experts. A majority of companies avoid this because they only view it as an additional and unnecessary expense.
But, think of it in this manner- the professional that you hire may know how to navigate around bankruptcy. Also, you can negotiate a contract instead of paying him up front. This way, you will only pay this individual if your financial situation improves. The best consultant to look for in such conditions is a bankruptcy attorney.
Filing business bankruptcy means that you lose most control of your business. Also, you will incur hefty legal fees when declaring bankruptcy. Instead of going this route, there are alternatives to get your firm back in the black. Consider making operational changes, hiring an expert consultant or negotiating a workout with your creditors.
Whatever you do – make sure you never to do the following: