Before you add your small business to the growing statistic of companies filing for bankruptcy, take a good look at your options. According to a report in Entrepreneur Magazine court filing fees can run $8,000 to $9,000 before you even get the bill from your bankruptcy lawyer. It’s true that conditions have changed from time you first launched your business, but if you know you have a market for your products or services the potential is there to dig yourself out of debt and keep it manageable.
Stop Spending, Pay Your Bills
First, cut back on the frills. Cut them out completely. No more pizza for everyone in the office on Friday or janitorial services for washing the windows. Your employees will understand they need to pitch in and help if you communicate truthfully. Look at services you’ve been paying that you can operate without, or find less expensive vendors as a replacement.
Put a freeze on any new spending. Absolutely do not permit anyone in the company to write a check for anything without running it past you for approval first. Don’t do anything to incur more debt.
Stay current with your bills. Pay your regular monthly bills on time. (This will help you with your credit rating.) If you have past due amounts, contact the vendor and make arrangements to catch up over time with a payment schedule. Be honest about your situation and request that any interest or late fees are waived. Stay in communication with your vendors so they know you are taking responsibility.
Arrange to Reduce Interest
Some of your debts might be very old, years old. Begin to pay these off by sending 10 percent of the oldest bill you owe each month. When the oldest debt is balanced, start paying off the next oldest. Call these creditors to find out if they have a hardship plan. Be realistic about the monthly payments you agree to make – don’t overextend yourself and default on your repayment plan.
Contact your financial institution and find out if there is a way to consolidate your loans into a single payment if you have more than one. A note for the future – never use up more than 40 percent of your allowable credit. It does not look good to lenders when you take every dollar of credit available to you.
Promote, Promote, Promote
By now you are already aware that your annual budget needs to be revised to come up with a realistic way to handle your cash flow. In conjunction with cutting back on spending, you also need to bring in new sales. This is the time to run a very aggressive marketing campaign. However, be very careful about where you invest your precious cash. Spend the money on a campaign similar to one you have run before with excellent return. This is not the time to test new ideas. You must get a wave of new sales in the door as quickly as possible.