By James Chittenden

Bankruptcies and foreclosures are court-ordered events that often result in business assets sold at auction. After the bankruptcy order is signed and issued by the court, the auction occurs 30-90 days later. And if you are looking to buy assets, this is an opportunity for you. Yes. You can FLIP assets, property, or actual businesses.

Good news for anyone looking to buy business property

You may or may not have been aware, but you can buy real estate, equipment, inventory, and other assets at auction for deeply discounted prices. For example, according to Greg Farner of Tampa Bay-based Bay Area Auction Services, inventory often sells for 40-60 percent of normal cost.

Auction services such as Bay Area Auction Services earn a percentage of auction proceeds plus expenses. The auctions can be found in local classified advertisements OR AuctionZip.

You can expect the following terms, according to Farner.

  • All forms of credit are accepted except American Express.
  • All titled vehicles must be paid for with a nonrefundable deposit in cash, wire, or certified funds.
  • Be prepared to pay for construction equipment such as bulldozers and excavators under the same terms.

Restaurant equipment is commonly available at bankruptcy auctions. Farner sets aside one Tuesday of each month as “restaurant day”, where the only items for sale are restaurant and food service equipment.

Farner offers the following advice to get the best possible deals at auction.

  • Study the items physically before bidding. Put your hands on it. Assess the condition in person.
  • The value of an item sold depends on how specialized it is. Inventory could sell for approximately 50 percent of cost. 

How to keep your ASSets out of Bankruptcy Court

Bankruptcy has a certain stigma of failure to it, but it can actually be a viable strategy. It can offer a fresh start for businesses.

The U.S. Small Business Administration (SBA) provides loan guarantees under various programs. While getting approved for an SBA loan has benefits, default means that the U.S. government is coming after you. The Treasury Department, not the bank, collects your debt.

After a disaster economic event when government loans are issued to businesses for emergency purposes, the government inevitably audits those borrowers. Those audits are to ensure that the borrowers are in compliance with the program’s terms. If they are not, the loan can be called, or required to be immediately paid in full.

Many businesses have not recovered from COVID-19, in spite of taking SBA loans. Many COVID-19 era-loans are in default, with borrowers in bankruptcy court.

Samantha Dammer of the Tampa-based small business law firm Bleakley Bavol Denman & Grace is a specialist in bankruptcy law. Dammer offers some useful warnings to business owners who are in default that can keep them out of bankruptcy court.

  • SBA loans are dischargeable like other loans. If they were secured by equipment, DO NOT SELL the equipment without giving the SBA an opportunity to repossess the equipment. Keep a paper trail or other evidence to show that you attempted to allow the SBA to repossess the equipment.
  • If the business is failing, keep some cash set aside for the SBA. It makes an offer in compromise more likely.
  • The worst part is when a business is secured by the home of the business owner, rather than business equipment. THEY DO NOT BUDGE even if the SBA loan was secured by a home.
And finally…

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