The major overtone of a recently published Charlotte Business Journal article on banks and living wills was related to the resolutions proposed by five of the largest major banking institutions in the country. As the article provided, two of the banks in our own backyard, Wells Fargo and Bank of America, failed at their attempt to convince federal regulators that the resolutions they provided were prudent enough to ensure that they will not fall prey to the same outcome as the Lehman Brothers bankruptcy in 2008. While it is doubtful that either bank will ultimately file bankruptcy, this article provides a good reminder for individuals who are business owners, and to all of us as consumers, to check in and re-evaluate our finances regularly.
To grasp your financial outlook, it is crucial to understand that debts are the necessary evil to thrive as a business or individual (For example: mortgages, revolving business line of credit, etc.) compared to the debts that are crushing the disposable income of a household or the necessary reserves of a business. Most commonly known, credit cards, unnecessary car payments, and home equity lines of credit are the vices that chew up a consumer’s disposable income. Conversely, what typically cripples a business are high interest loans obtained through “loan sharks,” daily merchant receivables paid through debit card transactions, unfavorable terms within a commercial lease, or the mere over-leveraging of the business.
As was the case with both Bank of America and Wells Fargo in increasing their high-quality liquidity assets, equally important for the individual and business owner is to evaluate which assets are needs versus wants. Many times businesses grow too fast through internal growth or external acquisition(s), and sometimes, that acquisition merely does not provide the return anticipated. See Bank of America’s acquisition of Countrywide Financial. For individuals, the nature of acquiring too much is the byproduct of attempting to keep up with the “Jones” by piling up credit card debt or purely being house poor.
If your personal finances are upside down or your company is struggling to make payroll because of past financial decisions, it probably feels as though you simply need a “bailout” like one that was given to some of the country’s major institutions in 2008. The good news is there are options available such as an out of court settlement, and in some cases, the “B” word…Bankruptcy.
Understandably, Bankruptcy can be a difficult decision for any company or individual but making that crucial decision can provide the necessary reprieve from the financial burdens being felt by the individual or the company. As is the case with your estate and business planning needs, it is imperative that you seek a qualified workout or bankruptcy attorney that can provide the professional guidance in helping you navigate back to the other side of financial prosperity and freedom.