A small business is the dream of many Americans, but sometimes things do not quite go as planned. Even with the best planning, a challenging economy, rising supply costs and new expenses make small business owner bankruptcy inevitable in Montgomery County, TX. If you are the owner of a struggling small business and wonder about your next steps, here are five signs you may need to consider bankruptcy:
- Payroll issues: The early signs of struggle are often reflected in payroll. If employees’ checks bounce or making payroll sends your bank balance into the negative every two weeks, it is likely time to seek better solutions. Many of these issues can lead to legal fees and bank charges that will only compound with time as the problem remains.
- You are honestly overextended: Take an honest look at your debt. Struggling businesses may first burn through credit cards and original loan proceeds before moving on to accounts receivable and working capital loans. The latter two depend on sales, and if your sales do not make big dents in the loan, or automatic loan payments make paying expenses impossible, you likely need some type of bankruptcy relief.
- Expense cutting: There is nothing wrong with taking a hard look at expenses and seeing where you can cut back. This often leads to better efficiencies. But if you are making cuts that are detrimental to your business’ recovery, that shows desperation. Forgoing needed office space, scaling back on your full delivery fleet or laying off essential personnel will do more to hurt your bottom line than improve it. If you are making these changes merely to finance debt, that is a large financial red flag.
- Collection calls: Businesses receive collection calls, too, and those calls can take time from promising prospects. Your business cannot function without internet access, electricity or supplies from your vendors. If you are receiving collection calls, chances are you are not receiving equipment or supplies either. Until you can resolve these matters, your business will effectively cease to function.
- Personnel issues: Do not lie to yourself—employees know what is going on, even if you try to hide it from them. Missed paychecks, bounced paychecks and the constant threat of layoffs will send your best workers elsewhere. There may also be an overwhelming feeling of apathy, as employees are short with each other or playing on the internet rather than working. People know when they are on a sinking ship and will look for a way to escape.
Many people are hesitant to look into bankruptcy due to small business challenges because they do not want to close down. They may just need time to organize debt and make a better plan. While a Chapter 7 bankruptcy will close down the business, you can remain open if you file a Chapter 11 or 13. A bankruptcy attorney will review all these options with you.
James R. Jones, Attorney at Law handles small business owner bankruptcy in Montgomery County, TX. To discuss possibilities to help your situation, contact our office today to schedule a consultation.