It is a challenging period for businesses. The pandemic has pushed the economy into recession, causing vast numbers of layoffs or rather ‘right-sizing.’
In return, leading to a contraction in consumer spending, starting a downward spiral of economic activity leading to bankruptcy in some businesses.
Can your company avoid bankruptcy? The answer is yes if you apply the following aspects.
1. Consult a financial advisor
Amidst COVID-19-fueled economic instability, you cannot ignore the services of financial advisors. A financial planner will assess the direction of your business and give appropriate advice for the situation.
An advisor will ease your decision-making process, and you will be well-positioned to make smart decisions.
A financial advisor should guide you on which costs to cut down on, opening emergency and investment savings accounts, and how to deal with situations inside and outside your control.
Even though hope is not a plan, as a business person in this volatile market, you need that hope to overcome your fears and continually keep growing your business. Seek either free or paid financial advisory services and avoid bankruptcy.
2. Calculate the maximum cost level
In this volatile market for you to avoid bankruptcy, then you need to determine the maximum cost level you can spend in your business. This includes inventory, raw materials, and operational costs. To determine the maximum cost level:
Subtract monthly debts and the cost of production from the average sales. Then add your income to the remaining amount – that gives you the maximum amount of money you can use to run your business.
Having a spending limit will help you from sinking into more debts. That way, your business will avoid bankruptcy and survive the pandemic.
3. Government grants and loans
You might be wondering why to apply for government loans and increase your current debt. However, if your government is offering grants and loans, then apply.
The best thing with government loans is that they have a more extended repayment period and less interest. Some governments are also offering grants and financial relief to businesses to keep them afloat.
Do not hesitate to take full advantage of government loans, grants, aids to help your business avoid bankruptcy.
4. Debt Repayments
Accumulated debts with interest injure your business leading to bankruptcy. To avoid your business running bankrupt during the pandemic, prioritize repaying your creditors. Start by renegotiating the payment amount, term length, and interest.
Alternatively, you can file for a consumer proposal in Edmonton or your particular locale. Seek the advice of bankruptcy professionals and get guidance on the best available debt settlement options.
This arrangement will enable you to settle your debts, maintain your assets, a good credit score, and avoid bankruptcy.
5. Invest in automated machines
Automation is one essential tool that will help your business avoid bankruptcy. The use of automated machines will help you in cutting down on the overall cost of production.
Automated machines will replace human labor, cutting down on labor costs and other non-essential human-related expenditures.
Also, with the use of automation, you can cut down on rent bills. Using machines, you will need less space, and you can sublet the remaining hence maximizing your income generation. Automation eliminates human based-errors, consequently reducing the chances of incurring losses.
If there are minimal or no losses incurred, your business will have enough operational funds. This way, you will be able to settle your current debts and avoid getting into more debt, thus avoiding bankruptcy.
6. Sell business assets
Selling of business assets comes in handy when you are in financial distress – though most people frown at the idea. Sell the business assets that you are no longer or rarely use to offset your current loans.
Is it a fleet of business vehicles, or a warehouse you no longer use? Then the best way is to sell the items and settle your debts.
Bankruptcy causes heavyweight impacts on your credit score. If the selling of your business assets is a viable solution to avoid bankruptcy, do not hesitate.
COVID-19 pandemic is a severe threat to the business world. And, as a businessperson, you will have to do all it takes to avoid bankruptcy, which has significant negative impacts on your business’s credibility.