As an entrepreneur, it’s important to set up a business in your image. For those of you who want to be in charge, then a sole trader option makes sense. If there is only a single person working for the company, it’s pointless trying to turn it into a limited company. Everything is going along smoothly and then disaster strikes. When sole proprietorships are in the red, the trouble is doubled because you are liable. Yep, that is one reason to avoid the formation like the plague. There is nothing you can do now except climb out of the hole. Below are four tactics that should act as a ladder.
The contract means that you have to pay creditors and there is no way around this fact. However, they may be willing to listen to offers. Remember that these companies want to see a return on their investment. As a result, they’ll consider any proposal that gives them the best opportunity. Merely calling and asking to revise the terms of payment may be the answer. For instance, you can see if it is possible to contribute smaller sums over a longer period. Interest will be a bitch, but that’s a bridge to cross further down the line. Try and show them that your money troubles are temporary.
Creditors aren’t trustworthy people, and you’ve given them no reason to have faith. So, the chances of them accepting a proposal may be slim, particularly if they’ve been burned before. The moral of the story is not to cry wolf one too many times. Thankfully, a debt management company can stand in as an intermediary. All you have to do is give the money to the professional debtors and they will release the funds accordingly. Because of their reputation, there’s a better chance that your creditors will agree to the deal.
Bankruptcy, Chapter 7
Never play around with bankruptcy. It’s the last resort that has dire consequences on the future. For example, you’ll never be able to take out a loan. Still, chapter 7 isn’t a terrible option for sole traders. As you are liable, you can file for personal bankruptcy without losing or giving up assets. Even better, the court may wipe off any unsecured arrears so that the business has more breathing space. Whether the firm can apply is down to the circumstances, but there is no harm in talking to an attorney. It could be the perfect exit strategy.
Who in their right mind would buy a debt-riddled SME? Anyway, you do know that this doesn’t clear the balance sheet, right? Yes, buyers won’t be knocking down the door, nor will you personal responsibilities cease to exist, but it’s still worth getting it estimated. For one thing, the money will go towards the overdue balances which will effectively write them off. Secondly, the business may have potential. Someone with money can use the idea to turn a profit while you wipe your hands of the hassle.
Are you a sole trader? Do you have any backup plans just in case?