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Ask the Lawyer

Bankruptcy Law

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Q: I own a seasonal business in Suffolk County wherein most of our sales occur in the summer months. Typically, I am able to pay vendors and other suppliers, who I’ve known for decades, throughout the year in order to avoid large payments in the warmer months. This past season has been slow and I am worried that I will not be able cut checks to everyone in the fall. Should I send my vendors/suppliers letters asking for a grace period or just pay when I can? I’m hopeful that business will pick up in spring and my company financials will be in a better place.


A
: You raise a good question. The key to the answer is in your decades-old relationships. Frankly, rather than alert (or alarm?) vendors, most business owners would simply pay when they are able to do so. But the fact that you have such longstanding relationships is an invaluable commodity. In all likelihood, you have a high degree of credibility with your vendors, so they may sit tight and allow you to late pay if you put them on notice and inform them of your intentions. So, in your case, I would consider providing your vendors with a short, concise and not overly negative report of your intention to pay, albeit on slightly extended terms. Your message to your vendors should be carefully crafted (preferably with your attorney’s guidance) to convey the relevant information… but without sounding alarm bells! And no matter what you decide to do, it is absolutely critical to keep the lines of communication open. The worst thing that you can do is fail to respond to your vendors’ requests for information.


Edward J. LoBello is a Member of Meyer, Suozzi, English & Klein, P.C., where he practices in the firm's Bankruptcy & Business Reorganization, Corporate Finance and Litigation & Dispute Resolution groups located in Garden City, NY and in New York, NY. Mr. LoBello concentrates his practice on business restructuring, bankruptcy reorganizations, work-outs, corporate finance, creditors' rights and related litigation.

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