4 Signs It’s Time for Your Business to File for Bankruptcy Protection

In the past we’ve talked about signs it’s time to file for personal bankruptcy protection. But if you run a business it’s important to know when to file for business bankruptcy protection, too.

Here are three things to watch out for.

#1) You’re having a lot of trouble with cash flow.

Most business experts will tell you cash flow trouble is the number one reason why businesses fold. Whether your business can keep enough in its bank account to pay all its bills every month is even more important than whether your business is making a profit.

Your business can probably survive one or two missed payments, though there will be ramifications. Any more than that and your company’s in real trouble.

#2) Your company has a great deal of debt.

If possible, it’s always a good idea to run your company debt-free. But some companies simply can’t get off the ground without large expenditures, which can mean maxing out credit cards, applying for bank loans, and borrowing from friends and family.

Each of those creditors has to be paid every month. If you’re not managing to do much more than make your interest payments your company has a problem, even if it seems like everything’s okay.

#3) Your personal assets are all wrapped up with your business assets.

Ideally, your business structure would keep your business life and your personal life separate. But it’s very easy to do things which could pierce that veil, and the moment you do your own house, car, retirement funds and other assets could end up at risk.

As Fundera notes, this is one of two major reasons businesses file for bankruptcy at all, rather than simply closing their doors. The other reason is the business has some hope of continuing after a reorganization.

#4) Your sales are declining.

A bad sales month is one thing, but if your sales are on a steady downward trend then it won’t be long before it’s impossible to pay your bills. In fact, this is one of the signs investors are taught to look out for when trying to determine if a company is in trouble.

The other sign? You’re making your sales, but they’re only coming from one or two major accounts. The moment one of those accounts stops buying your company is in big trouble. Of course, on its own this doesn’t signify a need to file bankruptcy (you can always try to score more accounts), but it still serves as a warning sign.

If your business is in trouble, we can help.

From choosing the right type of bankruptcy (Chapter 11 isn’t always the right choice,) to ensuring your debts are discharged without a hitch, Sadek and Cooper is here to help. We’ve helped many business owners just like you.

And remember. You wouldn’t be the first business owner to file. Many do. Many business owners go on to make it big after bankruptcy is finished. This is a legal remedy to help you deal with unforeseen circumstances, nothing more.

Call today. We offer free consultations and 24-hour service.

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