What are the alternatives to declaring my company bankrupt?

Bankruptcy is a legal declaration that a company cannot pay their creditors and needs to cease trading. The bankruptcy process can be initiated by a company or by one or more of its creditors. However, there are alternatives that may save a company from bankruptcy.

Creditor negotiations

A company may be able to negotiate with their creditors. If the business owner believes that the company could still trade and eventually make a profit, then they can talk to the creditors about deferring payment or paying by instalments.

If a business is made bankrupt and its assets sold, then the creditors may only receive a small percentage of their money. A negotiated settlement could mean that eventually they get most or all of the money owed by the business.

Selling the business

A business may be worth more than just its assets. A buyer may be found who believes that they can turn the business around and pay off the creditors.

The workout plan

A workout plan is one that is designed to keep the company going. If the plan is sound then it may be enough for the creditors to be agreeable to wait for their money. The plan needs to demonstrate that there will be future cash flow. This may be dependent on a loan or investment money by someone in return for equity in the company.

A workout plan can include measures to save costs, launch new products and services or sell off assets.

Hire a lawyer

Before declaring bankruptcy, consult a lawyer. A lawyer with expertise in business finance can negotiate with creditors on the business’s behalf. A lawyer can also send out a signal that the business is considering bankruptcy and this may prompt the creditors to take the workout plan seriously.

Hire an accounting and financial service

Use an accounting and financial service that has knowledge of turning businesses around. They will be able to examine the firm’s business accounts and advise on a workout plan. They can even write a workout plan for the company and provide advice on how to restructure the business so that it can trade at a profit again.

If the creditors know that an experienced outsourcing finance company is helping the business, this could provide them with the confidence that the business can be saved.

Before declaring bankruptcy a company should look at all the alternatives that are available.