There comes a point when a business owner has to stop asking:
“Where can I get more money?”
and start asking:
“Can my business realistically survive under its current debt obligations?”
If MCA payments have become so large that the business can no longer comfortably cover payroll, rent, inventory, taxes, suppliers, and other essential expenses, continuing to add debt may not solve the underlying problem.
It may be time to look at the bigger picture.
Bankruptcy is a serious step—but it isn't necessarily a sign that a business owner has failed.
For some businesses, restructuring debt outside of bankruptcy may provide a better path.
Depending on the circumstances, potential alternatives could include:
MCA payment restructuring
Debt consolidation
Refinancing
Negotiating with creditors
Selling assets
Reducing operating expenses
Bringing in additional capital
Other business restructuring strategies
The right choice depends on the business's financial condition and the nature of its debts.
The important thing is to understand your choices before you run out of them.
If a business has overwhelming debt, declining revenue, mounting creditor pressure, or little realistic ability to meet its obligations, bankruptcy may need to be discussed with a qualified bankruptcy attorney.
Different types of bankruptcy serve different purposes.
For example, Chapter 11 can provide a legal framework that may allow an eligible business to reorganize its debts and continue operating while developing a plan to address its obligations.
Whether Chapter 11—or another form of bankruptcy—is appropriate depends on the specific circumstances.
This is a legal decision, not a financing decision.
One of the biggest mistakes a struggling business owner can make is waiting until there is nothing left to work with.
If you're still operating, generating revenue, and able to meet at least some of your obligations, you may have more opportunities to evaluate than you will after the business has completely run out of cash.
That doesn't mean bankruptcy is the answer.
It means now is the time to find out what the answers are.
Before making any decision, you should have a clear understanding of:
Who do you owe, how much do you owe, and what are the payment requirements?
What does the business own, and what assets may be subject to liens or other claims?
How much money is coming into the business, and how much is going out?
Have you personally guaranteed any business obligations?
What rights do your creditors have if you default?
Most importantly:
Does the underlying business still have the ability to generate enough revenue to survive?
These questions can help you and your professional advisors determine whether the problem can be restructured—or whether a more significant solution needs to be considered.
Bankruptcy involves legal rights, obligations, deadlines, and consequences that can vary depending on the circumstances.
BizMoolah does not provide legal or bankruptcy advice.
If you're considering bankruptcy, facing a lawsuit, dealing with creditor claims, or concerned about personal liability, you should speak with a qualified bankruptcy attorney who can evaluate your specific situation.
BizMoolah can help you organize the financial picture and, when appropriate, help connect you with professional resources.
If MCA debt has become unsustainable, doing nothing is a decision too.
The sooner you understand your debt, cash flow, assets, contracts, and potential options, the better positioned you may be to make an informed decision.
Get the facts. Understand your options. Then decide what comes next.
Olsen Business & Financial Solutions (DBA. BizMoolah) can help you take a clear look at your business's financial situation and determine what potential financing or restructuring options may be worth exploring.
If your situation requires legal or bankruptcy advice, we'll tell you when it's time to involve a qualified professional.
Educational information only. BizMoolah does not provide legal, tax, or bankruptcy advice. Bankruptcy is a legal process and should be evaluated with a qualified attorney. Financing and restructuring options are subject to qualification, availability, creditor approval, contractual terms, and applicable law.