December 1, 2006
Most small businesses are financially cyclical to some extent, with some days, weeks, months and years better than others. Although good financial planning can lessen the impact of economic downturn, many businesses do experience some level of financial hardship at one time or anther. These times can be especially difficult if the business owner becomes uncertain of his ability to make a monthly payment to a secured lender.
There are ways to deal with cash flow problems as they apply to secured lender obligations. It is important to put them into prospective by way of a time line. Usually the inability to pay is not a sudden, surprise discovered on the day a payment is due, but rather foreseeable at least 90 to 120 days in advance. This is generally the most crucial time period and referred to as pre-default.
The biggest mistake small business owners tend to make during the pre-default period is ignoring the imminent financial tidal wave because they unreasonably believe that a miracle correction will set things straight, so they procrastinate. However, if the issue is admitted quickly there are more options available to correct the situation. In addition, pre-default solutions are generally easier to impose and less costly...
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by: Justin H. Dion, Esquire
September 18, 2006