When you originally established your company, the thought of having to cope with the stress of business debt is unlikely to have entered your mind.
After all, you did your homework and came up with an excellent business plan, one that helped you secure the financing you needed to get your company off the ground.
Unfortunately, in business as in life, there is a lot of uncertainty.
There may have been a decline in profits and an increase in expenses, forcing you to take on debt in order to keep the business afloat. “According to U.S. Bank research, a startling 82% of businesses that fail do so because of cash flow concerns,” writes Gretchen Schmid in a Fundera Ledger article. It’s important to keep in mind that while discussing cash flow, it’s not enough to merely consider the amounts of money coming in and going out. A cash flow problem could arise, for instance, if your invoicing system is used to run your business but your customers pay you after the due date of your loans.
Thankfully, bankruptcy isn’t the only option for debt recovery; there are several more to consider first. Filing for bankruptcy is a final step that may keep a small firm from going out of business after all other options have been exhausted. This is due to the various negative outcomes.
To begin with, you should expect to pay between $7,000 and $10,000 for legal representation throughout a small business bankruptcy case.
Then there’s the problem of repairing the harm to your professional reputation, which will reduce your access to key company resources like partners, allies, clients, and funding. Last but not least, your credit will take a hit.
Here are some debt-reduction strategies to consider: