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The Truth about Small Business and Chapter 11 Cases

Small Businesses when they get into financial trouble often elect to file a Chapter 7 or wind up the business and close it out.  Why?  Small Businesses do not take advantage of the opportunities available to them and their owners in a Chapter 11 to reorganize.  I know most people think that Chapter 11 cases are reserved for big companies like Hostess or US Air.  Reality is that is there are several layers of a Chapter 11 case and they are not just reserved for Hostess or US Air size corporations.

If you have a small business that is struggling to pay all its vendors, utilities, lease agreements and etc., a Chapter 11 case might be the right solution for you.  The gut instinct for small business owners when a company is struggling with getting the right amount of cash flow each month to meet their monthly bills is to get more debt with a bank or business lender.  This gut instinct and the results that stem thereof are simply the wrong way to go.

Life and business is about balance. The business must make enough money to pay for its debt each month.  So if more debt is not the answer, what is?  The answer is getting back to balance in business.  The company must find a way to get back to the balance of income in and debt paid each month without a struggle.

Some factors that cause the imbalance are the following:

1. Expenses are too high for the income of the business.  If this is the case, you cut back on expenses.

2. Outstanding Accounts receivable are impacting your bottom line.  If this is the case, you’ve got to get them paid.

These are the two main reasons businesses fail especially for Small Businesses.  Small Businesses are too busy just trying to get what they can in each month and meet all its customers’ needs that owners do not stop and take the time to ensure that these two factors are not destroying their business.   When owners finally take the time to understand that their business is not in balance, it is often too late.

Chapter 11 cases are designed to help all sizes of business to come back to balance.  The whole process is designed to get a business relief from debts that they simply will not be able to pay and allow the business to run within its income ability.  The truth is that a Chapter 11 case can save a Small Business from complete destruction.

The cost to do a Chapter 11 case can vary but if you seek out a small business Chapter 11 attorney, the fees will be reasonable and will cost you a lot less than that loan for more debt which will ultimately close your doors forever.  So, if you are a small business owner, do not give up the ship or weigh down the ship with more debt. You have options just like a Hostess, General Motors or US Air.   You need to seek advice for a reorganization of your company and bring it back to balance.