By: Eric A. Rosen, Esq.
As counselors and advisors, the members of our Bankruptcy, Creditors' Rights & Business Restructuring Team regularly advise companies and people with potential financial difficulties, or creditors who are affected by the financial difficulties of others, to plan for contingencies. This is all the more important in view of the COVID-19 pandemic.
Now is the time to be pro-active in dealing with potential fallout from the coronavirus. Here are our top 3 tips:
Form a Team of People to Identify and Manage Potential Problems
Examples of team members and their tasks may include:
- A person to maintain relationships with a lending institution, or a customer service representative of a lender to reach out to borrowers and discuss any concerns. This person should also familiarize themselves with the relief made available under the new CARES act.
- A real estate person. If you are a tenant, contact your landlord. If you are a landlord, contact tenants. Those who may be of greater concern, such as restaurants and service industries that are temporarily closed should be contacted first.
- An accounts receivable or accounts payable person. Reach out to those who you believe may not be able to pay outstanding bills, either timely or at all. If you have outstanding liabilities and are concerned about being able to pay them, contact your creditors now. Open a dialogue.
- An accounting/bookkeeping person. Make sure you know what your current expenses are, so you can anticipate potential changes. If you need assistance with this, consult a professional. Hiring the right professional will be money well spent.
Create A Conservative Cash Flow Projection
If you can, create a cash flow projection. This should be on a cash basis. It can be done monthly, weekly or even daily. Use your knowledge of your operations and estimate what funds will be received, what funds must be paid and when. For example, making payroll is a very high priority. The projection can be adjusted as needed based upon actual receipts and disbursements. If you need help in this regard, hire a professional.
Communicate
Avoiding problems only makes them worse. Be proactive and start discussions now with your lenders/borrowers, critical trade creditors/customers and landlords and tenants as appropriate. Landlords and tenants may want to explore potential lease modifications for the good of both parties. Trade creditors may be willing to work with debtors to maintain goodwill. A lender may be willing to consider a form of forbearance agreement or take other steps to prevent a loan from going into non-performing status.
Contact any member of our Bankruptcy, Creditors' Rights & Business Restructuring Team to assist you with any questions you may have.
Eric A. Rosen, Shareholder and Team Leader
Luis S. Konski, Shareholder
Laurie A. Thompson, Shareholder
Juan C. Zorrilla, Shareholder