Generally speaking, an economic recession may result in a loss of revenue and a lower profit margin over the course of several months or years. Depending on what your margins were prior to the recession, any loss of income might put your company’s assets at risk. Let’s take a look at a few ways that you can protect them until consumer activity picks up again.
Negotiate With Your Creditors
It may be possible to renegotiate the repayment terms on a business credit card or other lines of credit that your company might have. It may also be possible to ask for more time to make mortgage or rent payments from your mortgage servicer or landlord. By being proactive, you might be able to reduce the interest rate on existing debt balances or obtain a deferral. This may prevent the repossession of corporate assets or prevent creditors from engaging in other collection activities.
File for Bankruptcy
If your company qualifies for Chapter 11 bankruptcy, it will be allowed to operate normally while the organization works through its financial issues. In most cases, the company will be allowed to keep its assets while also negotiating new deals with creditors, employees and other interested parties.
Put the Company Into a Trust
Placing your business in a trust allows you to shift ownership of the organization to the trust itself. Therefore, it will be harder for creditors to repossess assets in the event that you are unable to pay them in a timely manner. An outsourced trading solutions provider may be able to help manage stocks, bonds or other equities that the company owns and has placed in the care of a trustee.
Learn How to Leverage Your Accounts Receivable
It isn’t uncommon for customers to take up to 90 days to pay an invoice. However, you may be able to get your money sooner by selling unpaid invoices to a factoring company. Once the invoice has been sold, the customer will pay the entity that has acquired it. For smaller companies, selling their accounts receivable can be an affordable alternative to getting a bank loan or line of credit.
A recession can have a negative impact on businesses that aren’t prepared for the downturn ahead of time. Ideally, your business plan will contain ideas for how to handle soft economic conditions and how the organization can survive and thrive during a period of adversity.
Anica Oaks is a professional content and copywriter who graduated from the University of San Francisco. She loves dogs, the ocean, and anything outdoor-related. You can connect with Anica on Twitter @AnicaOaks.
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