The liquidity crisis for many builders continues to worsen. Cash reserves are dwindling to a few weeks or months. Builders in that position must have a detailed survival plan in place, or they may be forced out of business. Even if your reserves are solid, you need a contingency plan, as financial and cash problems may escalate in the days ahead after nearly three years of a cycle with no clear turning point in sight. A critical component of any plan includes preparing for bankruptcy.
More than two years into the downturn, home builders face an accelerating liquidity crisis. Cash reserves are being depleted, backlogs are minimal to nonexistent, and margins are poor or negative. Builders have responded by slashing overheads, selling excess assets, and plowing personal cash back into the business–all part of a strategy to survive until market conditions improve. Public builders have written down or impaired assets to adjust to current land and home values, actions private builders can't easily take. What tools do private builders need to be effective and survive this crisis as their cash is depleted and lenders tighten the credit to finance their businesses?