When you run a small company it doesn’t mean you are immune to running up big debts. It’s a fact of the business world that loans are sometimes essential, and are often an inescapable part of building a business in the early days.
Practical plans
Repayment of outstanding amounts should form part of the financial planning for your business, whether they be loans, credit agreements or overdrafts, they must be addressed from day one. Some owners of small businesses can find this type of money management straightforward and treat it simply as an extension of the way they run their own personal or household finances and budget. Others may be unprepared for the extra work it can take to stay on top of everything, and without the resources to pay for third party help can risk floundering as debts mount up.
Outside influences
Of course other factors that are beyond your control can also come into play. Depending on which area of commercial operations you are involved in, market forces and macro-economic policies on a national scale can have significant impacts. For instance, some small businesses may have been unprepared for the recent rate hike from the Fed, while others may be struggling from the reduced consumer confidence that is still part of the fallout from the banking crisis.
Avoid trouble
Making sure that you don’t overstretch your resources and take on too much debt is an obvious, if slightly glib, piece of advice. However, other aspects of business planning, such as making sure you have a fallback position on your margins and have sufficient stock or materials to get through hard times, can be things that a first time CEO starting up in a relatively positive trading environment can be unaware of. Taking some small but sensible steps such as these can help avoid debt spiraling and definitely do not brush it under the carpet.
Worst-case scenario
Of course, sometimes things just don’t work out the way you planned and you can find yourself in a difficult situation where your business suffers a fatal financial blow. This might be due to a cascading catastrophe that has brought down suppliers, or a loan being recalled before time, or debts that have mounted up with the tax authorities.
Bankruptcy and company restructuring is a specialist field but it can be a sensible solution for some.
Suzzanne Uhland is a lawyer who has more than 20-years experience of business restructuring and Chapter 11 suits. Recognized widely for her work, Suzzanne was chosen by her peers to appear in The Best Lawyers in America and is mentioned in Who’s Who Legal Insolvency & Restructuring in California. Cases involving intellectual property, private equity in distressed investments, Chapter 11 corporate restructuring and derivatives in insolvency are just some of the areas in which Suzzanne has helped businesses find a resolution to their problems.
Options and opportunities
Of course these last-chance situations, although not as drastic as some might think, can still mean the end of the business dream that you’ve put so much work into. Evaluating assets and working out if you can sell any is one opportunity to inject much-needed funds without going further into debt.
No matter how bad the situation might seem, always remember that if you can’t see the answer for yourself there will always be professional help at hand to guide you to an acceptable solution.