Business owners sometimes have to take on debt as the company grows. Keeping this to a manageable level is crucial. There are many things that business owners should know about business debts. Understanding these can help you to determine whether you need to accept new lines of credit and how to handle things if you can’t make the payments.
Sometimes, businesses are doing well and taking on debt seems riskless, but the company has a downturn that makes it harder to make the debt payments. In some cases, the issue is that outstanding invoices aren’t being paid to the company, which makes it impossible for the business to pay its debts.
1. Can you handle any new debt?
Be realistic when you’re trying to determine how much debt your company can handle. Ideally, you’ll never get close to the maximum debt load your business can handle. Consider paying as much as you can when the company is doing well so you won’t have as much debt if things take a turn for the worst.
2. Is bankruptcy a viable option to resolve your debts?
Some businesses may be so far in debt that turning to bankruptcy relief is the best option to take control of the company’s finances. There are various forms of business bankruptcy, some of which depend on what business structure your business is set up as. Chapters 7, 11, and 13 are companies’ most common forms of bankruptcy for businesses.
Ensure you have someone on your side who understands your needs and how the business bankruptcy process works. This can make the process easier for everyone involved.