Dealing with overwhelming business debt that cannot be repaid can be a huge challenge. It becomes nearly impossible to keep your business afloat when your attention is consumed by putting out fires and dealing with harassing creditors. However, liquidation can be a way to eliminate your business debt and almost immediately get rid of fear, worry, and sleepless nights. With the right steps, it’s possible to keep trading. Here are six steps to take before liquidating your business that will help you stay in control and continue trading.
It only takes six steps to take before you liquidate your business to get rid of debt to stop putting out fires and harassing creditors: so that you can rather continue to trade and keep your focus on keeping your business afloat.
Step One: Making the Decision
The most difficult step of liquidation is deciding to go through with it. You must take an objective and clinical approach by focusing on your company’s balance sheet, not your emotional attachment to the business or your fears. If your business cannot pay its debt and has little to no cash flow, then it’s insolvent and must be liquidated. Taking proactive steps towards a solution instead of putting out fires with no end in sight is key to getting out of the debt spiral.
Step Two: Practical steps
Set a date for when your company will close down to ensure a smooth transition to your fresh start. This will give you a clear deadline to work towards and put you back in control of your business. You can manage creditors, make decisions regarding clients, contracts, bank accounts, cash flow, and staff. In other words, you will be active again instead of being paralyzed by inaction and fear.
Step Three: Restructuring
Once you’ve decided to liquidate, start to restructure your business so that you can continue trading. You can buy your assets back after liquidation, retain your staff, and negotiate with your landlord (if it’s not too late!). Your cash flow will be generated by a new entity, so you can decide what to do with the cash instead of paying debt.
Step Four: Take control of admin
Make a list of all your creditors, facing the facts and knowing where you stand. This will help you make informed decisions and empower you to act. Gather all the information about all creditors, determine whether there are debit loan accounts in the financial statements, and check the debit loan situation. Once you have an overview of your company’s financial situation, you can manage the situation better.
Step Five: Talk to Suppliers You Want to Keep
If there are suppliers you would like to keep, arrange with them to start invoicing your new company. If you still owe suppliers historical debt, make a payment arrangement with them from your new company. You can also keep your clients. You don’t have to tell them that you are liquidating, as you are busy with a restructuring process and not just a liquidation.
Step Six: Deal with Rental, Finance, and Hire Agreements
For property rental, if your rental is in arrears, talk to your landlord as soon as possible to make a payment arrangement for the arrears and a new lease agreement for your new company. If your landlord is already upset with you, it’s best to vacate the premises as soon as possible. For hire agreements, decide if you want to keep the item and arrange for the rental agreement to be transferred to your new entity or your name. For finance agreements, refinance any vehicles or other assets that have been financed before liquidation. You cannot sell assets before liquidation, but you can buy them back from the liquidator.