Small business owners throughout the country have suffered due to COVID-19 shutdowns and the resulting financial recession. Even though more than $20 billion was issued through the Small Business Administration disaster loan program, there are many business owners still in dire need of assistance and financial restructuring. If your small business is no longer profitable, you may need to consider bankruptcy as a way to manage your growing debt. However, there may be other options to pursue. You should first inquire with the attorneys at Dworken & Bernstein about the opportunities for growth that small business restructuring can provide your business.
Financial Analysis and Next Steps
Business restructuring is an intricate process requiring a complete financial analysis of your company. You may need to hire a financial analyst or accountant to render a financial forecast that assesses your company’s profitability, capital revenue, liquidity, and other financial factors. Understanding your financial data from the past five years is key in determining what future projections for your business might be.
Sometimes small companies do not keep accurate financial records, nor do they conduct internal audits or compliance checks to determine if they have strong operating efficiency. It’s crucial for operating efficiency to be optimized for a company to maintain attractiveness to potential investors or capital improvements. Small businesses routinely operate with limited cash flow, because they don’t have a lot of access to lending, a safety net, or attractive loan rates.
Small business restructuring requires substantial revisions to a company’s financial operations. This might mean limiting workforce hours, laying off an employee, sourcing cheaper materials, or working with vendors to cut costs or restructure payments. It might mean outsourcing payroll or basic services to a contractor that provides the same services for lower costs. It might also require raising prices for goods or services, or in the alternative, paring down services offered to lower inventory and overhead costs. Sometimes a simple financial analysis and review can reveal where chronic waste or overspending is occurring in your business. It might also be beneficial to negotiate small business loan rates with your loan servicer or creditor, possibly consolidating debt to take advantage of lower rates or access to additional credit.
The Small Business Reorganization Act program (SBRA) was recently passed to assist small businesses in the reorganization and restructuring process. The act is designed to streamline restructuring, allowing businesses greater flexibility in liquidation of assets and restructuring of existing debts. It’s also referred to as Subchapter V of Chapter 11. Businesses are not eligible if they gross more than $1 million in yearly revenue. This act is fairly new, and its implementation is still evolving. Certainly though, some of the advantages of this type of restructuring include your ability to retain most of your assets, inventory, appliances, and fixtures. Restructuring your business instead of filing bankruptcy also means that you remain in control over the company’s daily operations.
Contact Our Attorneys at Dworken & Bernstein Today
Our attorneys specialize in individual and small business bankruptcy. At our firm, we do not “jump the gun” regarding bankruptcy filings. We believe it is important for the financial and public reputation of your business to explore all alternative measures prior to filing for bankruptcy. One of those options is business restructuring. If this process sounds appealing to you and you would like to discuss your unique circumstances and potential options for resolution, contact our attorneys at Dworken & Bernstein. We are available for consultations virtually or at our offices in Cleveland and Painesville. Schedule a consultation today.