Safeguarding Your Business in Economic Turmoil

The current global crisis has put all business owners on alert as they navigate the new normal for shopping, communicating and interacting with their customers. Recently, many large-scale companies, like Neiman Marcus and JcPenny’s, are filing for bankruptcy to recover some of the significant losses they have seen over the last period.

For small businesses, the impact may be even more detrimental. According to CNBC, bankruptcy filings went down in April, except for small businesses. The filings jumped 25% in April with more filing expected in May and throughout the summer.

It makes business owners question how do they protect their company’s future, and what are the right options for them.

Is there one right option for all small business owners?

Before the current crisis, business owners would have to file for Chapter 11 bankruptcy in order to restructure their company to pay off debt. The filing would allow entrepreneurs to negotiate a payment schedule and dismiss some forms of debt. Usually, it was a way for business to restart.

However, Congress enacted a new option called subchapter 5, a faster process for businesses with debt below a certain threshold. It’s supposed to be a shorter and cheaper option for companies that may typically give up in most circumstances.

It’s still expensive for most owners to file for subchapter 5, so you could also consider chapter 7, where a trustee liquidates the assets and pays off creditor as much as possible. It’s usually associated with individuals, but businesses can implement it when appropriate.

There isn’t just one right option for every company. You need to evaluate all your options and consider what helps your business the most during troublesome times. Once you do that, you can make an informed, smart decision for you and your company’s future.