At some point in time most business owners make a move or take a risk that doesn’t pan out. When cash flow gets so tight that the money coming in from sales is not enough to cover the money going out for expenses, you are in what I call the “scrambling phase.”

On the Verge of Bankruptcy? Your Creditors May be the Solution

by Susan T Spencer. Susan is an entrepreneur, award-winning author of BriefcaseEssentials, lawyer, and former minority owner, GM and VP of the Philadelphia Eagles Football Franchise. Spencer has spent the last 25 years owning and running her own companies in exclusively male dominated industries after turning her back on the “corporate world”. Her series of articles about women’s issues and professional football have been featured on, The Huffington Post, and among others. Susan is a featured lecturer, and provides commentary on numerous sports radio shows.

At some point in time most business owners make a move or take a risk that doesn’t pan out. When cash flow gets so tight that the money coming in from sales is not enough to cover the money going out for expenses, you are in what I call the “scrambling phase.”

For those of us that have been there, it is extremely stressful and at the same time exhilarating because all your skills are called into action. Don’t wait until the day arrives that you run payroll and discover that there is not enough money to cover checks that were already printed, the scrambling, should begin the day your cash flow started to get tight. This is not the time to raise the white flag of surrender—it’s the time to put a resourceful strategy together.

A resourceful strategy means you need to confront your problem head on—think imaginatively—in new and original ways—to keep your  company afloat. Solving the problems of an ailing company on its last legs requires bold initiatives and an ingenious action plan in order to achieve success; and even then there are no guarantees. Consider all your options, weigh the many variables, and chose ways to move forward. One of your first moves is to stretch payments to your suppliers past their usual terms. In many cases you can delay payment for several weeks without getting more than a hateful call or being put on COD. Go over every payable and carefully decide who you can put off and how long. Each supplier is different so do not assume you can lump everyone in the same bucket. In those cases where you are not sure that a delay would be accepted and this supply or service is critical to your company’s survival, call your supplier and let them know what special payment terms you are looking for.

First you need to assure them that you are doing everything in your power to keep the company going and that by extending additional payment terms that will go a long way to help your temporary situation. If a creditor gets hostile, offer to start paying small (token) payments right away. If you send a small amount to an important creditor weekly, without fail, they will generally hang in there with you.

There is one conversation that you must prepare for more than any other; the one with,your banker. I always alerted my bankers about difficult business periods way ahead of time,so that they knew what was happening with my company. This should not be a “let me scare the banker” conversation. It should be a frank—but upbeat discussion about what is currently having a negative impact on your business (loss of a large customer, rising costs of essential raw materials, etc.).

Most companies that are growing their business borrow from banks and will need to use their equipment, products, inventory, receivables and/or company building plus the owner’s personal guarantee as collateral for the loan. This obligation means that if the business closes and there is not enough to pay off the company’s bank debt they will come after your personal assets to get paid what is owed. I made it a practice to always pay off my bank debt no matter what else needed to get paid. There are several reasons; first, if you leave a bank holding the bag and walk away your credit worthiness is gone and so is the possibility of borrowing in the future. Secondly,if you signed personally the bank will come after you and probably put a lien on your personal property.

What I learned during my attempt to keep a failing business alive is this: Creditors can handle bad news as long as it’s candid, honest, and up-front. Acknowledge the company’s challenges and let them know that the problem is temporary and that you have a plan to fix it. By communicating with your creditors in a direct way and showing them who you are, and what you are trying to accomplish, you give them the opportunity to help you to succeed by supporting your efforts to make the improbable possible!