McBride for Business Blog

What to do When a Vendor Goes Out of Business

January 16, 2017 // R. Shawn McBride // No Comments »

You’re planning your big event, you’re getting ready to host everybody and you find out one of your vendors went out of business. Or maybe they just don’t want to show up. They’ve decided that they’re busy and they can’t help you. What do you do at this point?

At this point it’s really about contingency planning. It’s really about figuring out what you can do next. You’re going to be scrambling, calling for other vendors in town, looking to find the next person who can help you. Let’s back up. Let’s think about some things we can do to avoid getting in the situation in the first place. Then we’ll look at what we can do in a specific situation.


#1 Review the financials. Anytime you have a vendor involved, you want to look at how financially stable they are. You may actually want to look at their financial statements, or at least want to have discussions with them about how sound they are, how long they’ve been in business, and how they’re financed.

#2 You want to make low down payments. When you make down payments to your vendors, that money is basically gone. If the vendor doesn’t perform, you may have a hard time chasing that money back, even though you may be legally entitled to get it back.  So put less down to motivate the vendor to show up and do their job.

#3 Have a backup ready. You want to know who you’re going to go to in the event that the vendor doesn’t perform. You probably interviewed multiple people before you decided on a particular vendor. Keep the contact information of the others. You may actually want to have a discussion with them about being a backup.

#4 Insurance. Insurance may be a great avenue. If you require the vendor to have insurance and include you in the coverage, you may be able to go after the insurance company in the event the vendor doesn’t perform. Or you may be able to buy your own insurance.

#5 Bonding. You want to make sure your vendor is bonded, so that you have a bond to go after.

#6 You can go in the bankruptcy line. Make sure that you file your paperwork with the bankruptcy court, etc., to make sure you get your money. This is your last-ditch effort.


The key to all of this is to try to avoid the situation. Once the situation has happened, your best hope is that you made a low-down payment, and you have a backup list that’s sufficient, and you can call one of your backups and get somebody in there. We recommend, for any of these situations, having a full list of all the different people you might need to call in the event of uncertainty, or if something unusual happens. Have that list on standby, to be on the safe side. If something starts to happen, if you start to see a problem, start working the phone, immediately.

What has happened to you, concerning vendors? How did you handle it? We would love to hear from you in the comment section.


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This posting is intended to be a tool to familiarize readers with some of the issues discussed herein.  This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances.  This article should not be treated as legal advice to any person or entity. Ricardo Santeugini.


About the Author

Shawn McBride is the Chief Innovation Officer at McBride For Business, LLC. His signature keynote, The 3 Laws of Empowerment ( ), gives audiences an entertaining look at how they can prepare, plan and protect themselves. You can reach R. Shawn McBride at or (214) 418-0258.

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