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The Financial Restructuring Group of Frost & Jacobs LLP featured an article written by Steve Hancox on corporate renewal. It appears in their March, 2000 issue of Bankruptcy Update, Vol. 3, Issue 1, page 3. |
Timing Is Everything Successful people often find it difficult to seek help when things are not going well. They are used to succeeding at whatever they do, sometimes through sheer will. Confidence in one’s ability can be an asset; however, if overextended, it can be a liability. Many entrepreneurs will some day confront a business problem that just will not go away. It is always in a business owner’s best interest to get help sooner rather than later. Sustained difficulties in areas such as profitability, cash flow, or quality of the product or service demand attention. These are symptoms of potentially serious problems that erode the value of a company for as long as they continue. If one or more of these problems sound familiar, you need to act quickly. Just how quickly you should seek help is a function of whose interests you would like to protect – your creditors or your own. If the business owner does not find a way to solve these problems, the creditors will. Banks can simply choose not to renew the company’s loans (which may have seemed as though they were automatically renewed monthly or annually while the company was prospering). Banks also have the right to call the loans early when one or more loan covenants have been broken, even if the bank has waived the breached covenant in the past. Owners who thought it was tough to get a loan before, when things were going well, can imagine their negotiating position when their bank wants out. It is also not unusual for suppliers to withhold credit when cash is tight and payables are stretched. Additionally, legal remedies may exist for creditors of the company. Once deterioration has reached the point where their ability to be repaid is jeopardized, they may be able to use the courts to force changes. Regardless of whether it is your bank or other creditor who initiates the action, you can be sure that their interests are not the same as yours. When creditors initiate action, their primary objective is to get paid. When you seek help early, the goal is to increase the value of your company. An earlier start allows you to consider the long term needs of your business. Getting help may be easier than you think. Each industry can present its own set of challenges. Different problems require different skills. Professionals with a variety of expertise and industry experiences are available to assist companies in need of corporate renewal. Many of these professionals have joined with attorneys and lenders to form the Tri-State Association for Corporate Renewal. Your Frost & Jacobs attorney is able to help you identify and qualify these people. While help is available, it is up to you, the entrepreneur, to make the request. In addition to keeping the focus on maximizing your wealth, getting help early can also lead to a faster recovery. |
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