Companies facing the possibility of insolvency can take steps to keep themselves financially solvent. Using existing lines of credit to borrow money is one way to avoid insolvency, but it also creates more liability and new payment deadlines. Selling off assets to other companies is also a common hedge against insolvency. Consumers may notice a local grocery store changing hands, for example. The original grocery store chain may be approaching insolvency and selling off 30 or 40 of its local stores in order to generate immediate cash for timely debt repayment.
What other options are there to avoid insolvency
Another option for avoiding insolvency is acquisition by a larger corporation. It is not unusual for major conglomerates to seek out small but commercially viable companies for acquisition or takeover proceedings. Even if the smaller company is currently flirting with insolvency, the rights to its signature product lines may prove valuable enough to save it from financial ruin. This happens quite often in the wholesale food industry. Struggling or insolvent manufacturers of a popular product may agree to sell off all of their assets to a corporation with better financing