9 Ways to Avoid Bankruptcy for Your Small Business

A small business owner needs to focus on various ways the business will succeed. It is important to consider challenges that the company is bound to face, including the potential of going bankrupt and how you can avoid them. Below is a list of ways to protect your small business from bankruptcy

Understand Why Small Businesses Go Bankrupt

Small business owners should understand common reasons why businesses go bankrupt to keep the issues on the radar and take the required steps to avoid them. In the U.S, the number of companies that filed for bankruptcy was 25,227 in the second quarter of 2016. Statistics indicate the number was 24,797 in the first quarter of the same year. Some of the reasons businesses go bankrupt include:

Taking Too Much Debt

A business with more debts than assets and cannot pay back business debt obligations, whether unsecured or secured, will go bankrupt. The type of debt you are financing and whether you include the business owner as a personal guarantee may also lead to personal bankruptcy.

Mismanaging Money

Even if the business has a high total money income and is bringing in reasonable amounts of money, keeping financial affairs in order by managing money well is essential. Avoid spending the hard-earned cash quickly on unexpected things, leading to business bankruptcy. Be sure to also research the insurance options and understand when things such as cybersecurity insurance rates increase.

Hiring the Wrong People

Intelligent investors know that a business’s success depends on a successful team, and the sky is usually the limit for companies that hire the right people. Hire professionals to design a responsive page, as 70% of consumers state that page speed is a priority while working with a particular company. On the flip side, hiring the wrong people leads to troubles, including bankruptcy.

There are various reasons why your small business may go bankrupt if you are not keen enough. Understand the causes and if you require any further clarification on how to avoid filing for bankruptcy, consider talking to a financial advisor or a bankruptcy lawyer. These professionals help business owners understand the current state of the business and the necessary precautions to keep bankruptcy at bay.

Consider, too, using a tool or company to help. For example, lawyers can use legal recruiters to help them find new talent for their practices. You may be able to find a head hunter who specializes in your particular industry.

Bring in Professional Help

Business owners concerned that their small business is headed towards bankruptcy are advised to consider seeking professional help. The professional service you desire is dependent on the type of support needed and the business finances. The professionals will help design a business logo that captures clients’ attention, as most of them tend to link a business with their sign. in fact, 35% of people wouldn’t have discovered a business had it not been for their sign.

Various experts that may help small business owners avoid bankruptcy include:

Financial Advisor

Working with a financial advisor when the business is getting started can be helpful. Such professionals help small business owners to utilize the most of the financial resources available to them. It includes everything from managing cash flows to advising on tax requirements (which vary depending on the business structure, like limited liability companies and sole proprietorships) to helping business owners determine the tools and accounts needed to manage finances in the best possible way.

Debt Consolidation Specialist

A debt consolidation specialist is necessary if the small business owner deals with significant debt. The professional looks into the financial situation to establish whether consolidating your debt obligations will make sense for your small business. Debt consolidation specialists help business owners to consolidate debts into a single loan with competitive interest rates to help them get the business finances on track and get out from under the existing debts.

Business Bankruptcy Attorney

If your small business finances are challenging and bankruptcy feels like a possibility, consulting with legal firms with business bankruptcy lawyers is essential. Such legal professionals evaluate the current state of your business by looking at the entire financial situation (including personal and business assets vs. personal and business debts) to establish whether filing for bankruptcy is the best course of action for your business. The attorney will help you walk through the bankruptcy process, assist you in filing for bankruptcy, and represent you in court.

Always Prioritize Your Debts

Small business owners must fulfill their debt obligations by paying lenders and creditors in due time to prevent any legal action from being taken, which may lead to bankruptcy. Pay the minimum on any debts you owe and ensure such payments are made in due time. Small business owners who struggle to pay such debts should seek help from an expert to explore debt restructuring options to pay all the debts without going bankrupt.

Small business owners are advised to minimize cash outflows, reduce expenses, and work with creditors and suppliers to maintain a solvent business. Hire professionals, including legal practitioners who deal with bankruptcy cases, and use the above-listed tips to arm yourself with adequate knowledge to keep small business bankruptcy at bay.