Business Loan Issues: Is it Possible to Restructure Our Business for Optimal Efficiency and Compliance?

Need Legal Advice for Business Loan Repayment and Payment Out standing issuesPlease note that we run a business at Chennai since 2003. While self and my brother are managing the operation, the partnership is equally divided between both our wives. Its a diversified operation with presence in organised retail brand stores and trading and distribution of range of products to various leading multi brand stores. There are two companies 1 being a simple partnership and the other is a pvt ltd company. In both they are the only partners. The top-line is around 25 crores for the last FY. We also own a land parcel in the name of the partnership company.

Huge exposure of credit  in trading business

As with any trading business, we have a huge exposure of credit to all our multi-brand dealers which usually is in the range of 7-8 crores. The average aging could be 90-120 days. We do enjoy a cc (Loan) facility with our bankers which is guaranteed by collateral ( such as our houses and the land parcel in the name of the company ) and personal guarantees from both the partners and the respective husbands.

While the whole business scenario was not great after the announcement of de-monitisation and introduction of GST, the discovery of COVID 19 seems to be having the potential of wrecking damage to all businesses in unknown proportion. Many of our dealers are expressing grave concerns about the very existence of their business due to this setback.

The following scenarios are foreseen in the near future

1. Business bounces back to near normalcy and all our dealers pay back their dues on time and thereby facilitate our repayments to banks and vendors - This could be the best-case scenario.
2. The business takes a long time to return. Our dealers delay their payments and thereby put us under pressure for our repayments. We may struggle to meet our cost resulting in capital erosion and default/delay of our repayments to our vendors and others.
3. Business slows down considerably. Some of our dealers either decline to repay or disappear and thereby create enormous pressure on us for repayments. As we are already heavily leveraged, we may fail in our commitments and go bust.

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Legal opinion for Legal Obligation

While the the first scenario is preferable, and the second is manageable, there may be a possibility of the third scenario as well. In case, if such a thing happens, we would like to have a legal opinion on the options available in front of us including our legal obligations of each of the individuals.