Small Business Page

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Should I Lend Money to My Business? One thing we see quite often is principals of small businesses lending monies to their businesses. It never fails that they will put a mortgage on their personal residence and then turn around and put the money into the business often without proper documentation. "We made an entry on the books of the company that it was a loan," so they say. When the company fails the first thing a trustee in bankruptcy will do is take the position that such a "loan" is really a capital contribution and the last thing the trustee will want to do is recognize that "loan" as an unsecured claim. It never fails that the principal loses the company, has no prospect of recovering anything on the loan and still has to pay the mortgage obtained for putting money into the business. The first question to ask is why one is putting money into the business in the first place. The next question is how can you protect it if you decided to put it in anyway. Each situation is unique so call your professional and discuss the alternatives.

The Bank May Call My Guaranty, Should I Deed the House to My Spouse? Most states have either a fraudulent conveyance or fraudulent transfer statute which in summary allows a creditor to set aside a transfer of property if the transfer is made while the debtor is insolvent or is rendered insolvent by the transfer. For example A and B own a $500,000 house with a $350,000 mortgage. If A transfers the house to B, but is still an obligor on the mortgage A may have become insolvent by transferring his or her interest in the house, but at the same time not getting rid of the mortgage debt. The statute of limitations may differ from state to state but it usually is around four years. If you are thinking of getting rid of your assets to make yourself judgment proof, consult with a professional.

Should I Employ a Financial Advisor? Often CPAs, Financial Advisors can often be invaluable to a small or medium sized business. All too often the company's outside accountant does not have the time or the inclination to do a thorough investigation of the company's operations. The Financial Advisor can identify goals, the prospects of getting there and what needs to be changed to meet goals. In financially distressed situations the Financial Advisor can often bring credibility to the table when management has lost it with creditors, both secured and unsecured. Yet you have to be careful when you select a Financial Advisor; too many officers of now defunct companies hung out shingles as insolvency consultants when their companies failed. They might do for you what they did to themselves. Ask around, check references and see who your attorney and accountant recommend. Financial Advisors are not necessarily inexpensive and you do not want to waste your time, your money and your business.