25 years ago small business owners, startups, whose businesses just didn’t make it commonly just closed the doors and walked away. Creditors who were wise enough to get personal guarantees or security interests in collateral would have some recovery, but, largely, people would just close shop and go get new jobs.
However, two developments have made this simple, intuitive solution, much more difficult. The first is internet fast lending. The second is nationwide real estate development. Both have made the walk off without a bankruptcy nearly impossible.
The internet is now teaming with lenders who want to “get you fast cash.” They will lend $1,000 to $100,000 “if you have been in business for one year or more.” They lend money to cash strapped businesses in a market where borrowing from traditional sources, like brick and mortar banks, is impossible. They do so at double digit interest rates that would make the de’ Medici family jealous. But, they nearly all require personal guarantees. This means that when you “walk off” the debt comes along with you. They are very aggressive collectors.
With the growth of national commercial real estate firms, the practice of leasing space without a personal guarantee of the lease is disappearing. Numbered are the days when walking away and handing over the keys means just saying goodbye to your security deposit. Now, national real estate firms are suing former tenants for damages on long term leases and lease with significant build out costs.
So, planning on closing a business can be as crucial a planning process as opening it was. Seeking the advice of a bankruptcy attorney, someone specialized in understanding insolvency and how your business fits into the insolvency marketplace, might make the difference between clutching victory from the jaws of defeat, or getting eaten alive by the collection process.
This article is written by an attorney at Wyatt & Mirabella, PC. Always consult an attorney before making any legal decisions. To make an appointment today for a free consultation, please click here to contact us.