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When your business or your finances are under pressure, there are always measures that can be taken to help.  We do this all the time for our clients. 

But the COVID-19 pandemic presents an unusual situation.  We do not know how long or how severe the outbreak will last.  With no horizon to look to, we have a hard time knowing which strategies to employ.  Yesterday I spoke with a client form whom we had planned to file a bankruptcy this month.  His former business is closed, leaving far too much expensive litigation.  His new business has started but will be unable to survive if all of his resources are devoted to litigating claims involving the old business.  The old business has also saddled him with debt beyond his ability to pay.  Bankruptcy looks like a perfect option to give him a fresh start. 

COVID-19 has now decimated his new business.  That business is very personal in nature, in the sense that he has hands-on contact with his customers, sometimes even going into their homes.  His business is not essential under the terms of the Governor’s  Orders, and must cease most of its activities.

The effects on the new business are devastating.  Revenue is drying up and he has no means to pay his employees.  We hear on the news about the government relief checks coming, but the details are not clear. 

We have no idea when the cease business order will end, nor how his customers will feel about close personal contact even when that order has been lifted.  He can expect, however, that many of his customers are suffering financially as well and may find that his service is not one they can afford or wish to spend their discretionary income upon even when his business can open. 

The end result is that we did not file the bankruptcy case.  We have elected to remain flexible.  In a worst case scenario the client will be unable to pay his mortgage or his utilities or the rent for the business.  He may well have in six weeks a great deal more debt than he does today. 

So instead of filing bankruptcy we are hoarding cash and aggressively cutting expenses.  We are making hard decisions about what to keep and what to let go.  We are evaluating options in an environment that is changing daily.  We need flexibility. 

The client and I will maintain close contact (via social distancing) and will re-evaluate options as often as the changes hit us.  I feel fortunate that I have dealt with this sort of situation, although on a much smaller scale, many times before.  For example, I have had to help keep businesses alive while waiting for confirmation of a sale or a major loan.  I have had to help farmers go on without knowing whether or not they would have the financing for their crop inputs in the spring.  We have kept creditors at bay for businesses that were waiting the award of a major contract, which would either make or break their business. 

But all of these situations had a reasonably determinable end date.  COVID-19, at least so far, does not give us an end date. 

For many of our clients, then, the strategy we are employing is to take measures to hold the business together while staying flexible to react.   If you have ideas on how businesses or even individuals can stay flexible in these times, please share them.  Thank you and stay healthy.


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