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Bankruptcy for Small Business: New Start or Big Challenge?

Bankruptcy for Small Business: New Start or Big Challenge?

Surprisingly, despite a bankruptcy filing, small businesses are still able to reorganize and become just as profitable as business who have never filed.  They apparently both share the same burdens: poor cash flow, high health insurance costs, excessive taxes, etc. and the same opportunity for a new start.

The major difference in a successful business turnaround between those who have filed vs. those who have not, according to a recent report released by the USSBA, appears to be their ability to qualify for future business funding and the percentage rates if they do.

Many business owners with a business bankruptcy filing in their history, would not even attempt to borrow, most likely for fear of being denied. Those who did attempt to borrow, face a 24% higher likelihood of being turned down and pay at least 1 percentage point higher.

This begs the question, is a bankruptcy filing more of an opportunity or a more of a challenge?

Experts in the business turnaround industry would argue that it is best to avoid a bankruptcy filing.  In addition to the hurdles it presents for future borrowing, it is expensive; time consuming; and, because a judge decides who gets paid and how much, does not always leave a company on the best terms with their vendors —  who might be critical in moving forward later.

If brought in on time, a professional turnaround firm, like Business Capital, can provide bankruptcy alternatives by restructuring debt; working with creditors and critical vendors; and doing it quickly and amicably to preserve vital relationships and cash flow, leaving the door open for future borrowing. In order for this to work, it is critical that a struggling business engage in this process before it is too late.

Restructuring and Bankruptcy attorney Karol Denniston with Schiff Hardin, LLP, sums up Business Capital’s value proposition best:
[sws_pullquote_left] “The team at Business Capital are highly trained professional deal makers who have assisted us in a number of successful out of court restructuring projects. Business Capital is remarkably efficient and effective in dealing amicably and objectively with large numbers of creditors. Their assistance in implementing out of court restructuring plans has resulted in significant reduction in restructuring costs and delay allowing clients that could not have afforded the administrative costs of a Chapter 11 to restructure and continue to operate.” [/sws_pullquote_left]
In cases where a bankruptcy has already been filed, a third-party loan syndication firm can often find alternative lending sources for businesses that have already been denied credit.  Such firms, like Business Capital, have relationships and access to a wide network of lenders in every asset class and industry, and can match a struggling business with a capital source that meets their specific needs.  Sometimes, this may not be just a single source, but rather a combination of lenders.

Whether a small company is able to effect a business turnaround or files for bankruptcy, there is help in navigating through a risk-averse market which can, in the long-term, overcome the challenges and pave the way for a new start.