Stitches In Time Can Save Nine For Troubled Businesses

April 16, 2008 8:20 am Published by

I continually stress in this bankruptcy blog how important it is for debtors to seek professional help at the first signs of a financial downslide.  In my Indiana bankruptcy law offices, I see thousands of individuals and couples each year, but I also find myself working with hundreds of small businesses.  One of the sad aspects of my meetings is that too often, these meetings are taking place months, or even years, after the trouble started.  And what that means is that certain remedies that might have been available no longer are.

You know that old saying, “A stitch in time saves nine!”?  Well, that is so true for businesses experiencing financial problems.  Of course, not every business is advised to file bankruptcy, but if  bankruptcy is the final choice, a whole lot of pain and trouble could be avoided by starting to prepare early on.

Here’s my first piece of advice to business owners:  As soon as you realize the money coming in isn’t enough to cover all the expenses, prioritize.  Pay the taxes!  Pay the utilities and other basic bills, all the while negotiating with suppliers and creditors for extra time to pay them.  (I’ve written before about factoring – you might want to see your accounts receivable to raise immediate cash.) The main thing is – don’t just let things go unpaid – talk to those suppliers and creditors, so they can see you making a good faith effort to keep up.

Second, if you apply for a new loan, tell the truth, for goodness sake!  Fully disclose all your debts.  Third, don’t try “hiding” any of your assets, or giving them away, or – whatever.  F-r-a-u-d is a dirty word – don’t give anyone reason to use it in connection with you or your business.

Keep in mind that if you file bankruptcy, all payments you’ve made to creditors during the year preceding the filing will be looked at to be sure no one creditor gets preference over the others.  There are some legal details involved with handling secured and unsecured credit, and this is an area I spend a lot of time working on with my clients (again, not a do-it-yourself project).

There are other “stitches” you can use to save time, costs, and legal hassles, but what I want to emphasize here is the “in time” part of the saying.  Let’s face it – times are hard now for small business owners and for families, so don’t waste time beating up on yourself.  You haven’t come this far as a business person by being unwilling to make the tough decisions.  So, what I say to you is, “Start stitching!”

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This post was written by Mark Zuckerberg

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