It is the nature of competitive business that some companies will struggle to run their operations effectively. It is often not enough to simply break even financially, but rather to make enough sales to earn a profit.
When a company experiences significant and ongoing business debt, it may be forced to file for bankruptcy. However, before taking that step sometimes a company can merge with or be acquired by another company that is in a healthier financial position.
Small businesses are arguably more susceptible to financial problems, but even large companies are not immune to this fate. For example, within a 10-year period the large national jeweler Zale Corporation underwent a great deal of turnover in its leadership and was close to filing for bankruptcy. In a recent development, the business was ultimately sold to Ohio-based Signet Jewelers, the company that owns the Kay and Jared jewelry chains.
Zale decided to go through with the sale because a majority of its shareholders believed that it was less risky than the alternative of bankruptcy. Before 2013, the company had not posted its annual profits in five years. The current CEO admits that challenges will continue for the business, but is optimistic about its financial future as a result of the acquisition.
It should be of some comfort to small businesses and their owners to know that even national companies face challenges in their day-to-day operations. Business debt is fairly common in general, and small business bankruptcy is certainly something that can help businesses resolve debts and stay afloat—sometimes emerging even stronger than ever. If your small business operation is currently struggling with its finances, seeking the advice of a legal professional may help guide you through this difficult time.