How To Get a Financial Workout

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The current world economic situation today is a testament to the fact that no business, no matter how small or large, can be safe from bankruptcy. Even the most established ones can go out of business because of insolvency and file for Chapter 11. 

However, there is an alternative to filing for bankruptcy and that is called a financial workout. A financial workout is actually a proposed plan to pay off your firm’s creditors within a specified period of time based on forecasted revenues. There is no standard financial workout plan since each company under the brink of bankruptcy has a unique set of financial conditions and problems.

What is the first thing that you should do if your small business is near bankruptcy? The first thing to do is to call for help. There are many firms and professionals specializing in business financial workouts. A Certified Financial Planner, Certified Professional Accountant, or attorney can help you plan and design a financial workout that is acceptable to you and your creditors.

Once you have hired that firm or professional to act as your consultant, they will conduct a quick study of your business so that they can devise a remedial action that will temporarily keep your creditors from barking at your door. This is the part where your business’ viability will be put into question. Will your company survive the current business and economic conditions if it is turned around? Are there any chances of raising cash to jump-start you business? These are juts some questions that will be considered in devising a financial workout plan for your company.

At the same time, your workout specialist will have to keep convincing your creditors to give you more time to find some money to pay off immediate debts. Usually, creditors give 90 days for firms to settle some of their debts. These will give time for the you and the workout specialist to come up with a concrete plan for turning the company around. 

Now that your creditors have been held off, the workout specialist will now work with you into saving and raising some cash. You can save cash by reducing your operating expenses. You can raise cash by selling some of your assets and raising new bridge loans. You can also find investors willing to infuse some money into your cash-strapped business.

Once you have paid off your immediate debts, you and your financial workout specialist can now work on the rehabilitation plan for your business. The plan could include debt restructuring, corporate reorganization, or downsizing of your organization. Regardless of the measures you take, the financial workout plan boils down to either the return of the company to its normal operations or the sale of the company.

Creditors will then have to look at the financial workout plan and agree to it. This is where you and your workout specialist need to use your convincing powers and negotiating skills. The goal is to convince all creditors to agree to the plan. Once they agree, then it’s time to set your plan into action.


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