Have you maxed out your cards, missed payments, and received calls from debt collectors? If your company has been struggling, perhaps it’s time to declare business bankruptcy.
Millions of companies and consumers declare bankruptcy each year when they can’t turn things around. If you’re in a similar position, read on for five signs bankruptcy might be the best option for your company.
1. Insurmountable Debt
If your company has amassed a large debt that you can’t realistically repay, then the more you wait, the larger this debt will grow. Every business owner dreams of running a debt-free company, but when that’s impossible, bankruptcy might be better than taking out more loans and borrowing from personal funds.
2. Your Business Deficit Is Spilling Over to Your Personal Assets
You should always aim to keep your business and personal assets separate. However, during tough times, you might have to use your personal equity to keep your business going.
If you find yourself leveraging the equity of your home, your retirement fund, and your other personal assets in order to keep your business afloat, then perhaps it’s time to declare bankruptcy and avoid further financial damages.
3. Declining Sales
Perhaps your business is still functioning, but sales are declining. If your monthly sales are steadily declining, then perhaps they are hinting at a future where your sales will get closer and closer to zero.
Unless you can do something drastic and increase sales, you might be better off declaring bankruptcy before you get further into debt. Investors and lenders use the number of sales as one of the metrics to determine the financial health of a company.
4. Profit Without Cash Flow
Even if your sales are steady and you’re turning profit, you might still be in trouble if your cash flow is negative. Cash flow trouble is one of the most common reasons businesses fail.
Simply put, you have to make sure you have enough liquid assets to cover all your bills and operational expenses each month. If not, then no matter how much profit you’re turning, your company will eventually fold.
If you’re regularly missing payments due to cash flow problems, perhaps you should look into your bankruptcy options before it’s too late.
5. Seeking Reorganization
Finally, bankruptcy doesn’t have to be the end. Your company might just need some reorganizing to stay afloat. If that’s the case, then you may have to file for Chapter 11 bankruptcy. Chapter 11 will take your company through reorganization under the supervision of a court-appointed trustee.
Reorganization will help you cover your payments to lenders and restructure your company’s financial profile. It’s a complex and challenging process, and that is why you should consult with a dependable local bankruptcy law firm before filing for Chapter 11.
Considering Business Bankruptcy?
If you’re facing financial troubles, you may have to make a tough choice. When considering business bankruptcy, it’s important to be decisive, but also make an informed decision to minimize financial loss and emotional burden.
Our advice? Seek out a dependable bankruptcy attorney as soon as possible to explore all your options and find the best course of action for your business!