When a business fails, lenders are concerned about maximizing recovery on secured loans while owners are worried about their personal guarantees on the failed company’s debt. Sandor Jacobson offers a potential “win-win” alternative to bankruptcy via The ABF Journal.
An unfortunate byproduct of the COVID-19 crisis is the failure of some businesses due to the loss of a key customer, an unsustainable expense structure, unexpected litigation or some other misfortune. Whatever the cause, these companies are going out of business, and their affairs have to be wound down. In these situations, lenders are concerned about recovering as much as they can on their secured loans, and owners are worried about their personal guarantees on the failed company’s debt.
For the benefit of all concerned, it’s critically important to choose the best method to wind down a company’s affairs. For many small- and medium-sized companies, the best choice may be the least well known.