Smart ways to prevent your small business from bankruptcy

Is your company having difficulty staying afloat? If you answer affirmatively, you are not alone. According to Opportunity Insights, a Harvard-based nonprofit research group, the number of open small companies decreased by 29% between January 2020 and December 9, 2020. 1

While this figure may seem depressing, it’s worth noting that more than two-thirds of small companies opened at the start of 2020 and remained operational 11 months later. Some may have had comparable financial difficulties as yours but were able to overcome them. If your company is experiencing financial difficulties and you want to prevent closure, the following measures can help you stay afloat.

Establish a payment schedule for your debts

While all debts must be paid, some obligations are more critical than others. Establish a payment schedule for your bills so you know which ones to pay first. Taxes, which include income, payroll, and property taxes, are one of the most important obligations for small companies. Tax money is the government’s property, not yours, and, as such, it should be your first concern. Payroll is your second priority, and any bill that is 60 days or more past due is your third.

Once those obligations are paid, you should pay the following bills in order: operational costs (such as rent and utilities), vendors and suppliers, secured debts, insurance, and credit cards.

Offer underutilized assets for sale

Take stock of things or assets that you haven’t utilized in a year. For example, you may make use of vacant storage facilities, inactive corporate vehicles, and even outdated fax machines to generate more revenue and space. Larger companies may want to consider employing a broker who can assist them in maximizing the return on their goods for sale. Eliminating obsolete or unused assets enables you to remain current with new technologies while increasing the value of your company.

Acquire a personal loan

If your company is on the verge of failure and you are trying everything possible to preserve it, the first thing you are likely to consider is “buying time.” Obtaining a personal loan provides you with more time to restructure and preserve your company. A personal loan may help you avoid bankruptcy and get back on your feet. There are many personal loan companies, such as Little Loans UK, that may offer you with an abundance of choices.

Engage a specialist with extensive expertise in the field in which your company operates

This may seem paradoxical to company owners whose businesses are already fighting to remain afloat, but expert assistance is well worth the investment. This may take the shape of an accountant, a debt consolidation specialist, or a lawyer, depending on the nature of the company and its circumstances. Consult a professional to get a better understanding of their choices and the resources available to assist them in avoiding bankruptcy.

Contracts should be renegotiated

By keeping an open line of communication with creditors, you may renegotiate more forgiving repayment conditions. By being candid with a lender about your impending bankruptcy, you may be able to negotiate a more manageable payment plan. While it may be time-consuming, asking about formal contracts may help protect the future of your company.

Eliminate unnecessary expenditures

Similarly to how we pay for unused subscriptions or memberships in our personal lives, we make similarly unnecessary expenditures in business. Almost every company allocates funds to locations that do not provide value to the enterprise. Take some time to go over your monthly budget with care and eliminate superfluous expenditures such as expensive conferences or unneeded staff.

Examine your insurance policies

Insurance is a significant cost for the majority of companies. Premiums for health, disability, and property and liability insurance often increase year after year, sucking cash flow away from more profitable uses. Consult your insurance representative. Consider the various alternatives. For example, by selecting a policy with a higher deductible, you can frequently significantly reduce your monthly costs.

Additionally, there are many life insurance alternatives to consider. While term insurance is less expensive, a whole life policy allows you to borrow against its cash value. Again, talk with your agent to ascertain your requirements and the most effective method to fulfill them given your current stage of life.

Create a Retirement Plan

As with a company’s strategy, you should have a documented retirement plan. Consider who will succeed you. For example, if you have more than one child involved in a business, who is better prepared to do the work?Regardless, have you considered how you would handle the near-certainty of conflict and wounded emotions that will follow from your decision? Consider the funding source for your succession strategy. There are many methods for implementing a succession plan, including borrowing, transferring property, or establishing a payment system. Whatever you decide, contact the experts to handle any legal, tax, or other problems that may arise as a result of your final course of action.

Finally, some reflections

While declaring bankruptcy is not the end of the world, it is always prudent to safeguard your company from financial disaster. You may save a significant amount of money by eliminating needless expenditures and selling non-essential things. Prioritizing payments and, where feasible, renegotiating your debt will also assist you in regaining control of your debt. Remember, when times are difficult, roll up your sleeves and fight for the future of your company.