Did One Bad Decision or Mismanagement Lead to Bankruptcy?

Staying competitive in the world of business often requires anticipating trends and being ready to meet consumer demands if and when those trends arrive. This is a gamble, of course. Correctly predicting a trend in consumer behavior can really be profitable, while an incorrect prediction can be financially disastrous.

One of the nation’s largest distributors of firearms┬árecently filed for bankruptcy, claiming that it bet big on an event that went differently than expected. Oddly, that event was the 2016 presidential election.

United Sport Cos. anticipated (as much of America did) that Hillary Clinton would win the 2016 election and become president. Sensing an opportunity, the distributor stocked up on guns, believing that sales would increase dramatically if a Democrat were elected.

The rest is history. Donald Trump was declared the winner, and sales didn’t pick up. The company claims its unsold inventory had high carrying costs, and that has contributed to its financial woes.

While this story is certainly compelling to most Americans – even those who aren’t interested in business – it may not completely account for the bankruptcy. One of the company’s lenders has filed an objection in bankruptcy court, claiming that the company’s largest equity owner mismanaged the business and its financial assets. As a result, the lender alleges, the business did not have enough financial cushion to weather an error like the missed call on the 2016 election.

Some may ask: If a business has filed for bankruptcy, does the reason for the bankruptcy matter? Much of the time, the answer is yes. For starters, it can have an impact on how funds are distributed to creditors in bankruptcy. It can also help predict a company’s chances of survival.

In this case, United Sporting Cos. is filing Chapter 11, meaning that it could emerge from bankruptcy and continue operating. The company’s long-term prospects will be different depending on whether its financial troubles were due to an isolated case of misjudgment or years of financial mismanagement.

If you are a struggling business owner considering bankruptcy, you need an experienced advocate on your side who will help you understand all your options and will guide you through the process in the most efficient and intelligent manner possible. That’s why it’s so important to work with a skilled bankruptcy attorney.

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