Small businesses can often be under a lot of pressure to make ends meet and stay in the black. The last several years have been especially challenging for small business owners, and many have been forced to close shop. As grim as the current situation may seem, there may be a few ways small business owners can avoid bankruptcy. Keep reading to learn what they are.
Prioritize high-interest debts
Your unpaid debts are causing your business to bleed money every month. Although you might owe money to several different lenders, who you choose to pay back first can make a world of difference. Prioritize payments that come with the highest interest since they will end up costing you the most money over time. It’s also a good idea to check your unpaid tax bills because you don’t want the IRS coming after your assets. At Freire & Gonzales, P.A., we get a lot of questions from small business owners on how they can save their most valuable assets when facing financial issues.
Hire legal aid
You should consider hiring a law firm that already has experience in business bankruptcy. They can help advise you and ensure you avoid the most common pitfalls. Unfortunately, we’ve seen too many businesses in Florida, Ohio, and Kentucky who fail to seek legal representation when facing bankruptcy. Professionals who know the law can assess the financial situation and offer solutions on how small business owners can avoid bankruptcy. On the other hand, in some cases, bankruptcy is the right course of action, and a specialized bankruptcy lawyer can guide you through the filing process.
Get advice from accountants
Most businesses treat accounting as an afterthought and only do their business books because they are bound by law. However, an accountant can do much more than just run the books for your business. They can be crucial for financial planning and identifying the right types of loans for your business.
While there are some tips on handling bankruptcy that can make a world of difference, debt will obviously be a problem for a business that is already struggling with its finances. However, a well-timed cash infusion that you can invest into areas with a stable return can help you stay afloat and recover your business. Just keep in mind that you should tread carefully and consult your accountant about what kind of debt you can take on. When you have developed a business plan, a financial planner can advise you on the best funding methods available to you. A strong financial plan can ensure that small business owners can avoid bankruptcy.
Talk to your suppliers
The suppliers you order from certainly don’t want you to go out of business because, in that case, they will lose all the revenue your company was providing. Try to renegotiate your contracts and your due payments. See if you can reduce or extend the terms of your payments. While not all of your suppliers will be open to flexible payment negotiations, some will probably be forthcoming. This can give you the time you need to recover and avoid bankruptcy.
If you are renting out a venue or office space for your business, you can also talk to your landlord and see if you can renegotiate the rent. Landlords with vacant properties will be losing money, and it might be in their best interest to figure out a mutually beneficial solution.
Collect the money that’s owed to you
Take a close look at your company’s invoices and determine which ones you can collect. When facing bankruptcy, it’s important to stay liquid, and an influx of cash can keep you from going under. Depending on the type of business you are in, you could ask your clients to pre-pay for future services. It might be a good idea to approach them with special discounts if they choose to pay in advance. This can give you a double benefit of ensuring future business as well as providing immediate funds.
Reduce costs and expenses
1. Cut back on your staff
Honestly, no small business owner likes the idea of laying off employees when times are tough. However, it’s better to lay off some of the staff than to entirely close your business up and fire everyone. When cash flow is tight, you can talk to employees about collective pay cuts to keep your business running. Downsizing your staff is by no means easy, and if you’re running a small business, you probably know all your employees by name. Although it may be tough, layoffs are one of the ways small business owners can avoid bankruptcy.
2. Cancel subscriptions
Make a list of all the services you are paying for. This should include everything from internet provider fees and software licenses to landscaping fees. There is a good chance that not every one of those services is entirely necessary for your day-to-day operations. When times are tough, you should take the bare-bones approach and cancel everything nonessential. You can also set a new company policy that every expenditure requires your signature.
3. Downsize your office space
Another way to save money is to reduce the rent you need to pay. By downsizing your office to a smaller space, you will save both on rent and utilities and maintenance costs. However, if you are going to be moving to a smaller and cheaper space, you’ll need to figure out what to do with your excess inventory. Initially, it’s best to look for a cheap storage facility, and you should be able to find an affordable solution with some effort in Ohio or Florida. Afterward, you can determine if you will be moving back into a larger space or selling off the excess inventory.
If bankruptcy is imminent
Sometimes, bankruptcy is simply inevitable, and there’s not too much you can do to avoid it. Instead of falling into despair, it’s important to find an effective solution for your situation. There are several ways to file for bankruptcy, and we recommend seeking out legal aid before making any significant decisions.
The bottom line
Thankfully, there are numerous ways small business owners can avoid bankruptcy. Try to be realistic about your finances and act on time to avoid closing up for good. However, even if it comes to that, know that you can always start again and rebuild.
Freire & Gonzalez is an attorney’s office where the attorneys are involved with their clients from beginning to end. You, as the client, will not be passed off to secretaries or paralegals like at other bankruptcy law firms. The attorneys will meet with you, will return your phone calls, and will answer your questions. We provide services in English and Spanish.
Our lawyers will answer any bankruptcy question you might have during the free consultation. To request a free consultation, please contact us at 305-826-1774. Please browse through our website, read our bankruptcy FAQ and see if our firm can help you resolve your financial issues. Contact Us at our locations: