You Financed the Recession on Your Credit Cards...Now What?
"I am concerned that many small businesses used the most available source of credit, their charge cards, to keep their doors open during the recession. It has gone on longer and impacted their company more deeply than they anticipated. The only way out for some of them now might be bankruptcy."
That from the CEO of a community bank in Texas. Are you one of the companies he is worried about?
Where is the stop button?
If you have been using credit card debt, whether it is business or personal, stop right now and pick a stopping point. It could be
- One year of your salary
- Three month's profit at normal levels
- One year's profit at normal levels
Give yourself a break
If you are beating yourself up for getting into debt this deep, quit that. Everyone, small business owners included, took their best guess. You may have thought this would last a year, and here we are at two years and counting. That is water under the bridge and we don't have time to waste worrying about how we got here.
What to do next...
- List all of your business debt, including any personal credit card debt run up for the business.
- Understand any debt covenants or agreements you have made with traditional financing and see if you are close to missing them.
- Consider where that stop button should be.
- Decide what happens next when you hit it. Is it laying off staff? Downsizing space?
- Are there other sources of revenue that are second-string for you but that you should consider to bring money in the door? (Be very cautious about losing focus, but this is a trade off you might need to make short-term.)
- Find someone to talk to. Ideally this would include your CPA. Perhaps it is your lender. Maybe it is another business owner you know through the Chamber of Commerce or other business group. I am finding professional colleagues to be more forthcoming than ever. There is a 'we are all in this together' feeling.
- Make a plan
The devil you know...
The devil you know is better than the devil you don't know. Fear is paralyzing and you are more fearful when you do not know what trouble you are in. Understand your current debt situation, decide where the stop button is, and determine the alternatives to taking on more debt. While I would not rule bankruptcy out, like you, I'd be looking hard for other alternatives.
