Bankruptcy – when it's the right move, and how to handle it
While everyone has dreams of starting up a business and achieving high levels of success, the truth is that it sometimes isn't meant to be. Not every startup founder can strike it rich – in fact, the majority don't even make it. Recent data from the Australian Bureau of Statistics indicated that over 60 per cent of small businesses are unable to keep operating for three years or more after starting up.
Some business models that once seemed viable begin to crumble after some time has passed. Customers lose interest, revenues start falling and eventually, it becomes clear that your organisation isn't going to make it. No business restructure will suffice – it's time to pack it in.
But when do you know that bankruptcy is the answer? And even if you do, how do you go about the logistical process of actually declaring that your business is insolvent i.e. sole trader and entering into bankruptcy? These are key questions, and if your business is struggling, it might be time to start exploring them.
When is bankruptcy the right choice?
It's never easy even to think about filing for bankruptcy, much less take the steps required to actually do it. It's humbling to admit to yourself and others that your business has failed and there's no way out of your current financial struggles. It should come as no surprise, therefore, that numerous business leaders tend to wait, putting off the final decision on this matter until they truly no longer have a choice.
Eventually, though, there really is no other option. One telltale sign is when owners are forced to dedicate their own financial resources to sustaining their businesses. When the revenue is no longer flowing and owners have to dip into their own funds, that might mean it's time to surrender.
It's reasonable to first explore alternate ways of escaping financial trouble before declaring bankruptcy. But if you find that there are no alternatives left, it's probably time to take action.
How to enter the filing process
While filing for bankruptcy is difficult to handle on an emotional level, there is good news. When it comes to bankruptcy in Australia, there are resources in place to smooth out the process and make it easy for business owners to understand and handle the logistics.
If your business is insolvent and you file for bankruptcy, it will first be assigned a trustee. This individual will be in charge of carrying out all the necessary logistical tasks associated with your filing – selling off any assets after consideration of security interests and what you are entitled to retain, and recovering any income you're still owed above that which you are entitled to retain.
The process is complex, but a good trustee can help sort things out. In addition, the Australian Financial Security Authority provides a range of resources intended to help soften the blow of bankruptcy.
Reach out for personalised help
Businesses are like snowflakes – no two are exactly the same. This being the case, it makes sense for businesses to seek bankruptcy solutions that are unique and designed to fit their specific needs.
If you choose to get in touch with Corporate Lifeline, that's exactly what you'll get. You'll also receive financial assistance that's sensitive and discreet – we understand that admitting to your financial hardship can be difficult and personal, so we try to treat your situation delicately and be attentive to your needs.
Corporate Lifeline is based in Sydney but has staff members scattered all over Australia. No matter where you are or what business struggles you're going through, we have expert professionals who are willing to assist you today.