Is your business struggling? Many businesses are. In fact, the national average for insolvency appointments here in Australia sits at an alarming 1,300 per month, of which about half are winding up applications. Now, I have covered what to do if you’ve received a wind-up application before. But demands from creditors can be overwhelming. Sometimes agencies will press you to liquidate your company, when often it’s entirely unnecessary. Liquidation should be the last resort for a company that is struggling to meet its credit obligations. So, my advice? Stop getting pushed around, and take control of your situation with these:
Four uncommon alternatives to liquidation
- Being denied opportunities for credit is one of the most common precursors to liquidation. Achieving access to credit markets can be difficult for a struggling company, even though it’s often in the best interests of everyone to give a business another go. In cases like this, specialists like My Business Path can sometimes negotiate opportunities for finance that are unavailable to the average business owner. Speaking with a financial broker is likely to be helpful in the first instance.
- Sometimes a business is in too much difficulty to negotiate access to the credit markets. That doesn’t mean you’re out of options though. Restructuring a business is one of the primary methods of fixing a failing company. We talk about the benefits of restructuring here a lot. But one benefit is less obvious than the others. During a company restructure, one option open to business owners is to convert debt into equity. Such a manoeuvre not only decreases debt, which might renew opportunities for finance, but gives existing creditors a stake in the business. It’s no longer in their best interests to see you sink. It’s crucial for the success of such an option for a business to pitch such an opportunity right. A creditor must see through the existing struggles of the business (and possible reputation risk for investors) to the opportunities that exist for stakeholders. You’ve got to know how to talk to the other side.
- In unstable economic times such as these, it’s common for businesses to keel over due to unfavourable conditions (as opposed to operational issues, or poor management). In such cases, it can be entirely possible to find a buyer to assume your credit obligations. Particularly if there is intangible value remaining in the company and/or interest rates are low, a buyer with a high appetite for risk might see this as a unique opportunity. As before, the key is pitching it right.
- It’s possible to raise funds outside of seeking finance. Public companies can issue securities to the general public. Private companies have a similar opportunity. ASIC makes provisions for private companies to raise funds from the general public in a similar manner if the fundraising doesn’t require a disclosure document. That’s not to mention fundraising from existing shareholders, employees, or subsidiaries.
Whatever option you choose:
If your business is struggling and you think one of these options is right for you, or any of the debt solutions we talk about on our site might work, then it’s absolutely vital that you seek advice from someone you can trust before you act. Insolvency agencies are notorious for fleecing their clients, creditors are famous for their lack of compassion and government agencies like the ATO are often uninterested in the plight of the little guy.
If you wish to discuss options for your business, contact My Business Path today.