You can expect the coronavirus pandemic to shut down millions of small businesses in the upcoming months. A range of small business bankruptcies can be expected as more than 40% of the country’s small businesses are expected to shut down permanently in the next 6 months due to the coronavirus pandemic. This was indicated in a poll conducted by the U.S. Chamber of Commerce. Commercial bankruptcies began to show a rise in the first quarter of 2020. Many of the small business owners are waiting for federal stimulus before deciding whether to file for small business bankruptcy. Although many of the small businesses may just disappear others could benefit from new law taking effect in February. Here are some questions you may consider if you are thinking of filing a small business bankruptcy.
1. How do you know when to quit?
The small business owners need to assess their balance sheets and the first question they must ask is, do you want to keep this going? If you have lost heart it is better to call your lawyer to aid you in winding down the operations however, if you believe that the business is still viable you can think about chapter 11 bankruptcy.
2. Can restructuring help?
Jot down a plan for the business world after coronavirus pandemic. How will you operate your business? Where is the revenue coming from? What will be the new expenses viz infrastructure, marketing, and more and how are you going to pivot the business around them. In case you have a plan that shows a positive balance sheet after bankruptcy the restructuring can help. Remember, chapter 11 is aiming to fix the balance sheets. You can restructure debt or eliminate it but it doesn’t guarantee revenue for you.
3. Taking a loan or filing for bankruptcy?
The situation of all business owners is going to be different. However, the general rule is that in case you cannot see enough future revenue to pay off the debts, it will become even more difficult if you borrow. Many business owners do not have the personal resources anymore to draw on and might not get the federal stimulus either. Do not borrow blindly and opt for options such as credit card or non-banking lenders who charge higher interest rates. If you have reached a stage that you are thinking about them it is time to call the lawyers.
4. Is it mandatory to file for small business bankruptcy for closing the business?
No. it is not. If it is possible to pay off the creditors or negotiate some kind of deal with them, there is no need to file for small business bankruptcy. However, take help from a lawyer to draft the agreement. Do not forget about withheld taxes. During difficult times a lot of small business owners use the money they had set aside for other reasons. When you have unpaid withheld taxes you become personally liable.
5. Will you be able to open another business?
Sure. However, getting the funding might be more challenging but not impossible. The good businessmen are those who already are thinking about another idea. It is the way America is. It is possible to start over and you do not get a black mark.
There are many studies offering statistics about the impact coronavirus will make on the state of small businesses in the U.S. But one thing is certain and that is the coronavirus pandemic will set back the pockets of the small businesses living in America. For a clearer understanding of your situation get in touch with professionals at Weller Legal Group as they have offices in Clearwater, Port Richey, Lakeland, and Tampa, FL.