Business Debt Restructuring: The Alternative to Bankruptcy

The past few years have been difficult for many small business owners. Faced with decreased consumer spending, many small business owners have become increasingly dependent on lender credit lines to compensate for their lost revenues. What may start out as simply a short-term solution can turn into a long-term problem that can threaten your business.

When borrowing is consistently used to cover the difference between operating costs and revenue, a business can quickly find itself faced with a large amount of debt and at increased risk of going out of business. It can be very frustrating to watch as your once successful business slides deeper into debt, and it may seem like there is nothing you can do to stop the decline.

Despite what you may have been led to believe, declaring bankruptcy is not always the best way to deal with your company’s debt crisis. There is an alternative to Bankruptcy.  Business debt restructuring firms specialize in working with lenders and other business creditors to resolve your debt problems and get your business back on the pathway to success.

What is Business Debt Restructuring?

Business debt restructuring involves analyzing the business’ current financial situation and developing an effective strategy to restructure and pay back loans and other business debt. A business debt restructuring firm will analyze all aspects of a company’s income and expenditures to see where adjustments can be made. This involves taking a hard look at employee salaries, operating expenses, facility costs, vendor pricing, supply costs, accounts payable and account receivables.

Once the business debt restructuring advisor determines the overall financial health of the company, he or she will formulate a detailed plan aimed at streamlining costs and paying back business debts. A major aspect of this plan will involve the business debt restructuring advisor going to anyone to whom a business owes money and working with them to develop a payment plan in line with your businesses cash-flow. This may involve renegotiating or modifying contracts, extending payment dates, or reducing business debts. Businesses need to look at the alternative to bankruptcy.

Why is Debt Restructuring Better than Bankruptcy?

Declaring Chapter 11 bankruptcy is obviously one way to deal with business debts, but it does not mean you get to walk away from your debt free and clear. First and foremost, filing for bankruptcy can be extremely expensive. The filing costs alone can be substantial and attorney’s fees can run hundreds of thousands of dollars depending on the size of your business.

Even after all of the time spent between meeting with lawyers and showing up for court dates, the creditors may still be able to appoint a representative to handle the court appointed restructuring. This appointed trustee essentially takes over the running of your business. You go through all the costs and trouble of bankruptcy to try to save your business only to end up having someone else playing your role. And if you are unable to become profitable in a short period of time, the bankruptcy trustee can convert you to a Chapter 7 bankruptcy, close your business down entirely and liquidate all your business assets.

In contrast, a business debt restructuring plan allows you to stay in control of your business. You still handle the day-to-day operations, which mean no interloping trustee to answer to. The role of the business debt restructuring advisor in this case is not to act as the manager of your business, but rather, as a professional guide to help you to run your business more effectively and resolve your debt problems.

The main issue is that bankruptcy only treats the symptoms and not the cause of the problem. By this, I mean bankruptcy does not help to address how your company ended up in trouble in the first place. A business debt restructuring advisor can help you pinpoint where the problems are and offer you solutions to resolve them. With their help, your company can decrease costs, increase profitability and resolve your business debt problems quickly.

Which Will You Choose?

Between 2008 and 2012, more than 245 thousand companies were forced to declare bankruptcy. This number may seem daunting, but your business does not have to share in their fate. A skilled and experienced business debt restructuring advisor can help get your business profitable once again and resolve your debt problems without having to submit to government or creditor intervention. More than that, it offers you the tools to grow your business even after you have fixed your businesses problems, leaving you with a stronger business.

Contact the Turnaround Group to see what are the alternatives to bankruptcy.

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