Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
What to Do if Your Business Is on the Edge of Bankruptcy
Aug 7, 2020
As a business owner, you'll always be on your toes to ensure that your business succeeds. However, this may not always be the case. There are financial liabilities that could cost your business a great deal. These may include debts, payable interests, overdrafts, and other various acquired expenses.
Liabilities can be categorized into current liabilities, contingent liabilities, and non-current liabilities just to mention but a few. All these could mean disaster for your business especially if you had not had a contingency plan. Now, this could either spell catastrophe for your business or the start of something new.
In this informative guide, we'll be shedding more light on what you need to do if your business is on the edge of bankruptcy.
1. File for Bankruptcy
If you've been running your business unsuccessfully and are found to be in debt, you shouldn't spend sleepless nights lamenting over it. Just file for bankruptcy and you'll find the help that you need. In doing so, it will help to shield you against creditors. This simply means that when creditors try to collect accumulated debts from you, you'll have been granted immunity by the courts.
This, however, means having an accredited bankruptcy attorney on your side. After filing for bankruptcy, which will require learning more about the various bankruptcy exemptions you might receive afterward, it could benefit you in maintaining ownership of your business, maintaining your credit score, and the most obvious reason, being under non-dischargeable debts. But then again, you still have to be aware of the disadvantages involved in filing for bankruptcy.
These include:
- Loss of your business credit cards
- It may in a way impact your credit score
- You could lose your property in the process, even for a short while
- You could be denied tax-free refunds
- It may affect your chances for housing and job benefits.
2. Disposing of Some of Your Assets
You could have acquired a lot if not much over your years of business success. These are assets that could help get you out of trouble. If you've been found unable to pay your debts, the courts may declare your franchise bankrupt. Selling some of your assets could help settle some if not all of your debts and see you get back in business.
See: A digital bank that raised $110 million from investors including Leonardo DiCaprio has run into trouble
You may have furniture, machinery, properties, or side businesses that can be turned to convenient cash to pay angry debtors. Now, - and this is not an idea that will be welcomed by most - selling your assets doesn't mean the end of you, it simply means that you'll have another chance to get back in the game.
3. Have a Sit-Down with Your Creditors
This is not the last option to avoiding bankruptcy but a crucial pointer that could help save you from a tarnished business reputation. It would rather your creditors got a hold of you, secured some if not all their money, or got you bankrupt. The choice is yours! As an entrepreneur, it's important that you weigh your options.
And while this will not be a pleasant decision, they might help to get you out of harm's way by simply having a sit down with them. This is what smart entrepreneurs do every day; making painful decisions for valid reasons. Schedule a meeting with your debtors and if they are understanding, they'll give you ample time to get your house in order.
4. Consult with Your Closest Business Allies
Running your business in a competitive market space is no easy thing. But let's face it, there are competitors in your location who benefit in one way or the other from your business. These could be your closest allies that could help in settling your debts. It could also be your very trusted business partners, friends, or family members. It's high time you got in touch with those in your inner circle of allies who'll help settle your debts and salvage your business.
5. Seek Help From Creditors
Times are tough! This is a no brainer and, especially at a time when you have to operate your business under close supervision from the government. We are living in perilous times and this has to do with the scourge that has wiped thousands if not millions.
You only have limited business working hours as a result of government-imposed lockdown. This means that you don't have much time to earn as you used to. You could talk to financial consultants in your location to know your options. They could help you secure yet another financial solution that could help in settling your immediate crisis.
As you can see, it's all about weighing your options to get untangled from financial liabilities. Come to think about it, this is the sole reason why most businesses will be at the brink of bankruptcy, debts. The above pointers will help to get you out of your tight situation and at the same time, allow you to reestablish your business.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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