The Covid-19 pandemic has been devastating for businesses all over the world. Countless companies have had to close, while others are struggling to keep their heads above water. For example, the hospitality industry had to cut down 50 million jobs worldwide because of the pandemic, with millions coming from the United States.
If your business is in danger of going under, it’s vital to take action now. Here are five ways to avoid bankruptcy during the pandemic.
Create a Cash Reserve
One of the best ways to protect your business from bankruptcy is to have a cash reserve on hand. This will give you a cushion to fall back on if you experience a dip in sales or an unexpected expense. Aim to have enough money saved up to cover three to six months’ worth of operating expenses. Here are various ways you can save up a cash reserve:
Open a Bank Account for Emergency Funds
When starting a cash reserve, it’s essential to have a dedicated bank account for the funds. This will help you avoid dipping into the money for other purposes and make it easier to track your progress.
Save a Percentage of Each Sale
Another way to quickly build up your cash reserve is to save a percentage of each sale. For example, you could put away 5% of every sale into your emergency fund. This is a great way to ensure you’re constantly adding to your reserve and keeping it well-stocked.
A cash reserve can ensure that your business can stay afloat regardless of the circumstances.
Reduce Your Expenses
Another way to avoid bankruptcy is to reduce your expenses where possible. Take a close look at your budget and see where you can cut costs. You may need to make some tough decisions, but it will be worth it in the long run. Here are options when reducing your expenses:
- Cut marketing expenses: If your budget allows, consider cutting back on marketing expenses. This can be a difficult decision, but it may be necessary to reduce costs.
- Reduce inventory costs: Take a close look at your inventory and see where you can cut costs. Can you get by with fewer or cheaper products from another supplier? Exhaust your choices to reduce inventory costs.
- Delay or cancel expansion plans: If you have plans to expand your business, such as opening a new location, you might need to delay or cancel those plans. This can be difficult, but it may be necessary to avoid bankruptcy.
By reducing your expenses, you can free up more cash to help keep your business afloat.
Prioritize Your Debts
If you’re already struggling with debt, you must prioritize which debts you pay off first. Paying off high-interest debt should be your top priority, followed by debts with lower interest rates. You can free up more cash each month for other expenses by prioritizing your debts. Here are also different ways you can pay your debt:
Consolidate Your Debt
If you have multiple debts with high-interest rates, you may be able to consolidate your debt into one loan with a lower interest rate. This can save you money on interest and make it easier to pay off your debt. It might also be good to hire a professional to help you out. An experienced bankruptcy lawyer can help you consolidate your debt. They can even review your assets and see which ones you can use to pay your debt. They might even be able to negotiate with your creditors.
Work with Your Creditors
If you’re struggling to make monthly payments, reach out to your creditors and explain your situation. They may be willing to work with you and lower your payments or interest rates. This can make it easier for you to afford your debt and avoid bankruptcy.
Renegotiate Your Leases
If you’re renting office or retail space, now is the time to renegotiate your leases. Many landlords are willing to work with struggling tenants during the pandemic. Ask for lower rent payments or a longer lease term so you can save money each month.
Seek Government Assistance
There are several government programs available to help businesses during the pandemic. See if your business qualifies for these programs to get the financial assistance you need. Here are some of the most common government assistance you can use.
- SBA Disaster Loan Program: This program offers low-interest loans to businesses impacted by a disaster, such as the pandemic.
- Paycheck Protection Program: This program provides loans to businesses to help them keep their workers employed during the pandemic.
- Economic Injury Disaster Loan Program: This program provides low-interest loans to businesses that have suffered an economic injury due to the pandemic.
While these programs won’t solve all of your problems, they can help you avoid bankruptcy during this difficult time.
The Covid-19 pandemic has been devastating for businesses all over the world. Countless companies are struggling to keep their heads above water.
If your business is in danger of going under, it’s vital to take action now. Following the tips above, you can avoid bankruptcy during the pandemic and keep your business afloat until things improve.