Despite all the dollar signs flying around in the press, small businesses in this Country are in trouble — pretty much all of them. Yea, I know about the SBA programs, PPP and EIDL and forgiveable advances — yea, I know. Small businesses are still in real trouble. Closures, oil prices, reduced sales, reduced interest, changes in customer habits, ill employees, increased insurance costs. Small business are just in trouble, and there is no magic wand that is going to fix it all on May 1 or June 1 or even next fall.
I am looking at three strategies. First, managing cash flow. Deferring payments isn’t a cure, but it buys time to refocus. Reducing expenses, cutting deals with lenders. It all helps, even if all it does is buy time. Second, now is the time to confront the fundamentals. Can this business be profitable in the new world in which we find ourselves? Can it lure its customers back? Does its community have the cash flow to buy what it is selling — particularly a problem in the oil patch, right now. Third, if the business can restructure its debt, reduce interest rates, change payment terms, eliminate a lot of the unsecured debt; does that make a critical difference?
If the answer to that last question is yes, you need to know about the brand new Subchapter V in the Bankruptcy Code’s Chapter 11. There are some amazing new tools to restructure small businesses that just became available in February, 2020. It is going to make the difference for a lot of businesses between having a future and not. The statute was passed last Fall, it went into effect in February, 2020. Nobody knows what all it can do or not do just yet, but it is a game changer for small businesses caught with too much debt in a sudden downturn.
More on that in the next few days.