THE EDGE
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Surviving bankruptcy
O.C. ranks fourth in the nation for filings by small businesses. But there is light at the end of the tunnel.
by tina borgattaPublished: January 01, 2011
Orange County has seen its share of bankruptcies. William Lobel, a Newport Beach-based attorney who is one of the nation’s leading authorities on bankruptcy, says that’s because Orange County’s business community is teeming with creative entrepreneurs who aren’t afraid to take risks. Lobel elaborates in this exclusive Q&A, and he offers tips for business owners who are struggling to stay afloat.
OC METRO: What’s the most important move a small business owner can make when he finds himself on the brink of bankruptcy?
William Lobel: Seek the services of trained professionals who understand the options and rules. Dealing with creditors is often a counter-intuitive process. The earlier in the financially distressed situation the client comes to me, the more likely we’ll achieve a result that’s satisfactory to the client.
OCM: Have you noticed any common weaknesses among companies that end up in distress?
WL: A lack of liquidity. In thriving markets, it’s due to overexpansion – going beyond the capacity of the business to finance that growth. A lack of liquidity severely limits the options available to a business owner in resolving credit difficulty. Certain steps need to be taken to increase the number of options available if liquidity turns out to be insufficient. To be successful, those steps often require planning and some amount of time before the business hits the financial wall.
OCM: Does bankruptcy necessarily mean financial ruin?
WL: Chapter 11 is all about the rehabilitation of financially stressed businesses. If a business can be restructured in a way that it can operate profitably in the future, the Bankruptcy Code provides a way of dealing with the creditors to allow a business to operate. One of the things that makes me most proud is when I drive down the 55, 405 or 5 freeway and see all of the businesses that continue to operate as a result of my efforts, together with the owners’ efforts, to resolve financial difficulties. In the difficult economic times that presently exist, people in general are more understanding of the need for companies and individuals to file bankruptcy.
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OC METRO: What’s the most important move a small business owner can make when he finds himself on the brink of bankruptcy? William Lobel: Seek the services of trained professionals who understand the options and rules. Dealing with creditors is often a counter-intuitive process. The earlier in the financially distressed situation the client comes to me, the more likely we’ll achieve a result that’s satisfactory to the client. OCM: Have you noticed any common weaknesses among companies that end up in distress? WL: A lack of liquidity. In thriving markets, it’s due to overexpansion – going beyond the capacity of the business to finance that growth. A lack of liquidity severely limits the options available to a business owner in resolving credit difficulty. Certain steps need to be taken to increase the number of options available if liquidity turns out to be insufficient. To be successful, those steps often require planning and some amount of time before the business hits the financial wall. OCM: Does bankruptcy necessarily mean financial ruin? WL: Chapter 11 is all about the rehabilitation of financially stressed businesses. If a business can be restructured in a way that it can operate profitably in the future, the Bankruptcy Code provides a way of dealing with the creditors to allow a business to operate. One of the things that makes me most proud is when I drive down the 55, 405 or 5 freeway and see all of the businesses that continue to operate as a result of my efforts, together with the owners’ efforts, to resolve financial difficulties. In the difficult economic times that presently exist, people in general are more understanding of the need for companies and individuals to file bankruptcy. |
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