Your journey as a business owner will be full of speed bumps. Some of them will be low to the ground, and you’ll hardly feel them. Others will be quite pronounced and you will feel like your back is broken when you run over them. One of the worst types of speed bumps is debt. Now, many businesses are in debt. Some of the largest companies in the world like Netflix are in debt up to their waist. However, they have investors that believe in their business model and they are showing great returns. So, even though they are saddled with debt, they are clearly climbing out of it. So what happens when a business isn’t able to show signs of life under its own mountain of debt?
Taking a backseat
Subordinated debt can be useful but you have to swallow a piece of your pride. Offering up the majority share of your assets to the bank or loan lender, you will effectively give them control over the ownership of assets the business uses to help to grow. You may also find that giving majority control of your personal assets is quite useful for paying your debt. With the help of a business debt attorney, you can set up an agreement whereby the creditors own the majority of your assets but they cannot sell them. In effect, you give them the ability to use them to generate income. This could be that you’re told to leave your house and it will be offered as a lease and to renters. They take the majority if not all of the earnings but you technically may have the right to return once the debt has been paid.
A phased recovery
Debt is a bitter pill for anyone. But when you own a business that seems to be going under, it’s best to bite the bullet and try to make a soft landing. With the help of an insolvency trustee, you can file for bankruptcy, and be given a whole host of options. The trustee usually works for the government and thus there are no fees. You cannot pay the debt so there needs to be a slow hand-off of assets and ownership of the business. The aim for you is to keep as much wealth as possible so your personal life isn’t greatly damaged. The trustee will give you options such as selling certain assets in order to be given leniency on others. You could receive a higher percentage of the sale of your assets if you were to cooperate and help find the higher bidder. Things like this will allow you to start a new financial life, a little less harmed.
Giving it away
If you have an investor(s) backing you, or perhaps you’re looking for an investor, you could give up all control and share of your business. You may not be able to make an income for some years but you will receive the money you need to pay off your debt and keep working to make your business profitable again. This is challenging but it can be done if you find the right people.
There are numerous exit strategies from a business that is drowning in debt. Talk with an insolvency trustee first, to see what your options are.
