Please note that all names used in this case study are fictional and do NOT in any way, represent any living or deceased person, or any existing or terminated business entity.

Eight years ago, Wendy and Ollie formed an LLC to open their designer lighting retail store. As the only retailer in Monarch County offering a broad selection of both designer and utility lighting, free design consulting services, and expert installation support, the business was an instant success.

Robust, growing sales enabled the business to pay off its first SBA loan in a little over 3 years.

Wendy and Ollie saw a need and opportunity for an electrical supply outlet in their geographical market. They took a new $250,000 SBA loan, leased warehouse space (for the requisite large inventory of electrical supply parts needed) and were soon off and running.

Again, they enjoyed instant, bigger-than-expected success, until …

Two big-box home improvement and contractor supply stores opened in the county. Willow’s higher-margin electrical parts sales to “do-it-yourselfers” dried up overnight. At the same time, Willow had to drastically lower prices on sales to contractors to remain competitive with the “big box” building supply stores.

Even though the lighting division continued to thrive, its profit could not keep pace with the rapidly increasing losses generated by the electrical supply operation. Losses and liabilities piled up fast, and in less than two years, bankruptcy was inevitable. But Wendy and Ollie were not about to give up!

What if …

• There was a way to hold their creditors off, while
• getting the breathing room to reorganize the business so it could once again thrive, and
• realistically, work their way out of debt, without suffocating the business.

After consultation with a certified bankruptcy attorney, it became clear that filing for Chapter 11 bankruptcy could turn those “what if’s” into “what is”.

Filing for Chapter 11 relief was their best next move.