Buying Bankruptcy, Or Buying Into Business Failure

14 Jun Buying Bankruptcy, Or Buying Into Business Failure

Bankruptcyisn’t the first thing on someone’s mind when they open a business, but an overwhelming percentage of small businesses fail early in their life. That’s neither new, nor news.

What is less well known is the number of people who buy an already established business that has been successful or appears to have been successful, only to have see it fail.

Buying into business failure isn’t something most buyers consider. Many business buyers paid far too much for the dream of business ownership. To get the business, they often borrowed money – from a bank, the SBA, or the seller – to buy a business that may have been viable with no debt, but soon flounders under the debt service. Worse yet are the situations where the previous owner / seller couldn’t make a go of it but was able to sell the business to a newcomer at a profit.

The lure of self employment is strong.

It promises freedom, room for innovation, and financial reward. It is easy to assume that an established business is immune from the risks of failure that plague new businesses. However, those promises are hard to collect on under any circumstances and virtually impossible if the purchase price was too high.

If your business is struggling, take a look at the debt service on the purchase price, and see if the difficulty lies there.

Sometimes, bankruptcy can help get rid of the debts that are dragging the business down, and enable it to keep operating, but the sooner you find out what the problem is and address it, the more likely you are to be able to keep the business alive.

Article: bankruptcy options for small business.

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Cathy Moran, Esq.

I'm a certified specialist in bankruptcy law (California State Bar Board of Legal Specialization) practicing in the San Francisco Bay Area for more than 30 years. In addition to practicing bankruptcy law, I train new practitioners at Bankruptcy Mastery.
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