How to Keep Your Business Out of Bankruptcy
Originally published in Business.com July 9, 2019
Managing your debt is critical to avoiding bankruptcy
While the number of businesses filing for bankruptcy has declined since the Great Recession, there are warning signs that this trend could quickly take a turn in the wrong direction. If that happens, savvy business owners must be prepared.
Research from the Supreme Court on federal court filings show that bankruptcy filings are at their lowest levels in more than a decade. However, at the same time that bankruptcies ‒ legal processes involving actors that can't repay their debts to creditors ‒ are declining, business debt is rapidly rising. In fact, the Federal Reserve's recent financial stability report shows that leveraged lending is 20% higher than last year and flags a decline in protections for lenders against default.
This is important to be aware of because debt and cash flow ‒ more precisely, the inability to effectively manage debt and cash flow ‒ are the principal drivers of bankruptcy. If you want to understand the risk of selling your goods or services to someone on credit terms, understand the credit report first.
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