Tips to Shore Up Your Business Finances
Bankruptcy has always been intended as a “last resort” measure for avoiding total insolvency and financial ruin. It’s an important safety net for emergency situations, but it does come at the cost of a big hit to your credit score and ability to secure financing for the following seven to ten years.
There’s no doubt that pulling the trigger on a bankruptcy filing is a tough choice, especially if you expect to have credit needs for business in the coming years. Before you do it, you will want to carefully consider all of your existing alternatives, as some combination of them may be able to keep things under just enough control to avoid having to file for a bankruptcy.
Approach Lenders Individually About Debt Settlements and Hardship Programs
It can be tough to approach a lender and ask them to work with you on a settlement. However, keep in mind that companies who lend money do this on a regular basis and are often willing to work with their customers. A settlement is often a much better option for them than letting a bankruptcy wipe out their payments entirely, or having to sell the debt to a collections agency for a tiny fraction of what it is worth. Some have hardship programs specifically for this purpose that they are happy to offer to customers who have traditionally had good payment histories.
Only ask for settlements on accounts that are already delinquent or charged off. Companies will be more receptive to a reduced lump sum payment amount, but in some cases, they may be willing to work out an alternative payment plan.
Explore Accounts Receivable Financing
Sometimes a cash crunch occurs because customers are slow to pay their invoices, or because a company has landed a large contract and now has the expense of delivering the product but is not able to collect from the client right away. If this is your situation, you can make those unpaid invoices work for you by working with a factoring company.
Consider Peer-To-Peer Lending
Peer-to-peer (P2P) lending allows individuals and small businesses to offer direct loans to others, cutting banks out of the equation. Individuals make their own determinations about who they’re willing to lend to, and it is very possible to find a lender who will help you out when you’re facing down bankruptcy.
Of course, the big issue here is that you’re borrowing money when debt is already a problem. However, there are limited sets of circumstances where this makes financial sense, provided you still have the financial means to pay. For example, if you can negotiate a lump sum settlement on one of your major debts, a private lender may be able to provide you the funds at favorable terms that you can afford to pay on an ongoing basis.
Related Article: Financing Options During a Crisis
Consult an Attorney
If you are considering a bankruptcy, an attorney can help to negotiate debt settlements or payment plans and will sit down with you to help map out your full financial picture along with all of your realistic alternatives. If it should happen that bankruptcy is the best possible answer to your situation, an attorney makes the process much less complicated and ensures that the court aspect goes off without a hitch. It is an added cost, but one that can pay off by obtaining a successful discharge on the first try and with no delays.
About Universal Funding
Universal Funding is a private funding source that has funded thousands of businesses and more than $2 billion since 1998. We turn your accounts receivable into the funding you need through invoice factoring and can have capital in your hands in a matter of days.