When’s the best time to call a Licensed Insolvency Trustee? Before it’s too late
Revenues and accounts receivables are dwindling, and creditors keep pounding on the door. The challenges of running a company can feel overwhelming in the best of times, but when money problems persist the pressure often drives small business owners into a state of denial, panic, and paralysis. Often, many will simply hold-off and do nothing until it’s too late.
Small business owners are, in general, optimistic and take-charge individuals; positive attributes that can be a handicap in times of crisis. Instead of seeking immediate help, some entrepreneurs wait—thinking things will somehow get better—or they’ll try to save money by finding a solution on their own. Needless to say, these aren’t smart moves.
The dangers of not getting help with your business debt
When the business is struggling financially the consequences of inaction or a do-it-yourself fix can get owners in serious trouble. Potential consequences include:
- legal action by creditors which could result in a judgment against the company and even more costs, such as legal fees and penalties
- funds seized and bank accounts frozen by the CRA for unpaid back taxes, penalties and interest
- more liabilities incurred for the corporation and its directors as debts and interest keep piling up
- payment demands sent by the CRA to customers, compelling them to send their outstanding payments directly to the agency
- appointment of a Receiver by the bank to seize the company’s assets and shut down the business
- seizure of leased assets by leasing companies
- the landlord changing locks and proceeding to seize and sell the business assets for rent arrears
Don’t wait—get professional help today and know your options
So, what’s the best time for small business owners to get help with their financial struggles? In many cases the answer is simple—as soon as possible. By working with a qualified professional, such as a Licensed Insolvency Trustee (LIT), small business owners can get an objective view of their situation and the options available to them. In most cases, a LIT can recommend options other than a bankruptcy. However, the longer you wait to speak to a LIT, the fewer options there are available.
What exactly is a LIT? In short, a LIT is a federally regulated professional who can provide advice and services to individuals and businesses with debt problems.
A LIT brings a solid knowledge of business, finance, tax and insolvency laws. This knowledge allows them to assess a business that is struggling and present the best options available. Depending on the circumstances, a LIT might suggest:
- refinancing to pay off debt and ease cash flow. An experienced LIT is typically tapped into a wide network that includes banks and alternative lenders and should be able to help arrange a refinance.
- restructuring the business to reduce costs and maximize growth opportunities. A LIT can negotiate an informal settlement with creditors and can help owners make tough decisions—such as reducing staffing costs, selling excess assets or closing a business unit to focus on the core business so that the company can continue to operate.
- selling the business entirely—an experienced trustee will be able to assess a company’s viability for future market growth under new owners and help connect the business to other professionals, such as lawyers and valuation experts, who can prepare the company for sale.
- filing a Proposal that will allow the company to settle with the creditors, including the CRA, by paying only a portion of the debts. It also allows operations to be restructured, excess assets to be sold or returned to the secured creditor, and unprofitable locations closed. All the costs associated with the restructuring are covered by the Proposal. The business owner maintains control of the company and its’ operations.
- filing a bankruptcy and shutting the business down to avoid incurring additional liabilities, while minimizing the personal liabilities of the owners or directors. This is the last option, but in many cases the best solution. In some circumstances, putting a company into bankruptcy and starting a new business without the burden of the debts may be the best route.
End the stress with help from a Licensed Insolvency Trustee
In the end, speaking to a LIT sooner will maximize the options available to a struggling business. Knowing that there’s a solution for their problems will ease the stress—allowing small business owners to concentrate on the future. But it’s critical to seek a trustee’s help immediately; those who wait too long could severely limit their options.