Bankruptcies seem to be occurring left and right as a result of the economic strain that many businesses find themselves in as a result of COVID-19. Just recently, news came out that retailer J. Crew was set to file for bankruptcy. This sparked renewed fears that other retailers may be on the same path in the not so distant future. Thus, it begs the question: Can bankruptcy actually help a business survive?
Bankruptcy Can Be An Answer For Some Companies
The thing that people so often get wrong about bankruptcy is that it is often not the final chapter of a company’s story. A small business may go bankrupt and be wiped off the face of the Earth, but that is not always the case for a larger company. They declare bankruptcy for a variety of reasons, the most common of which is to restructure and get some creditors off of their backs.
When a large company takes on a significant amount of debt it can start to buckle under the weight of that debt during a time of crisis. This is when the company must consider its entire slate of options for how to move forward. Some choose to declare bankruptcy as a way to catch their breath and restructure as a stronger business moving forward.
Making Some Much Needed Changes
A major thing about bankruptcy is that it helps clean the slate for those who have made some mistakes in the past. When the mistakes of any one business start to pile up, they can quickly find themselves sinking under the weight of their own errors. It may be time for that business to declare bankruptcy and start anew. After all, they can decide to make better choices going forward than they had in the past. Some companies even discover that they are in the wrong industry altogether.
Retail brands have been under a lot of pressure in the economy that we live in today as many areas are not allowing customers to enter those establishments at this time. Even if customers can come in, they have to take extra precautions to ensure that they are remaining safe and health. Social distancing and mask wearing are the name of the game these days. This on top of all of the other pressures that retail was facing from online competition has driven many of them to the brink. It is no wonder their bankruptcy rates are skyrocketing.
Light At The End Of The Tunnel
It is unclear how long this pandemic and the impacts on our global economy will carry on, but we do know that it will inflict many changes on the way that we live and how we do business. Bankruptcies are likely to increase during this time, but it doesn’t mean that every business that declares bankruptcy is going away. They may just need to restructure, and in so doing they can perhaps emerge from this pandemic even stronger than they were before. Each individual case has to be looked at as a separate incident, but we know for a fact that bankruptcy does not have to mean the end for any company.
Matt Shealy is the President of ChamberofCommerce.com. Chamber specializes in helping small businesses grow their business on the web while facilitating the connectivity between local businesses and more than 7,000 Chambers of Commerce worldwide.