{"id":4395,"date":"2016-04-04T10:47:30","date_gmt":"2016-04-04T15:47:30","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/business-debt-and-bankruptcy\/help-for-your-business-during-financial-trouble.html"},"modified":"2026-03-13T01:13:00","modified_gmt":"2026-03-13T06:13:00","slug":"help-for-your-business-during-financial-trouble","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/business-debt-and-bankruptcy\/help-for-your-business-during-financial-trouble.html","title":{"rendered":"Help for Your Business During Financial Trouble"},"content":{"rendered":"\n
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Help for Your Business During Financial Trouble<\/h1>\n\n
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\n By Catherine Hodder, Esq.<\/a> | Legally reviewed by Jordan Walker, J.D.<\/a>\n | Last reviewed\n
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Editorial Note: We earn a commission from affiliate partner links on FindLaw. Commissions do not affect the editorial integrity of our legal content.<\/p>\n\n <\/div>\n \n

\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

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Financial help for your small business can come in the form of reducing expenses and restructuring debt. Small business owners<\/span> can maintain operations but must prioritize paying payroll taxes, trimming non-essential spending, and negotiating new payment terms<\/span> with creditors. There may also be assistance in the form of small business loans<\/span> or lines of credit<\/span>. Oftentimes, business attorneys can help with restructuring and other options for better financial health<\/span>.<\/em><\/strong><\/p>\n\n <\/div>\n\n\n\n

These days, many entrepreneurs<\/span> are facing severe financial challenges<\/span> and are looking for help for their struggling businesses. Here are some great tips that you can use.<\/p>\n

What To Do if Your Company Is in Financial Trouble<\/h2>\n
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  1. \n

    Make sure your taxes are current<\/strong>. Always, always, always pay all of your taxes on time. Payroll taxes are withheld from your employees’ paychecks, and it is important for your small business to make sure these are paid correctly. The IRS<\/span> and your state’s tax authorities can hold you personally liable for these taxes <\/a>and can, and likely will, assess penalties for non-payment. Also, bankruptcy proceedings will not likely make these debts go away.<\/p>\n<\/li>\n

  2. \n

    Understand your cash flow<\/span> management<\/span>.<\/strong> If you have come to the point where you realize that you don’t have enough money coming in to pay all of your costs, you should cut your expenses down to the bare minimum. Some of the best help for business is often found by simply trimming the excess from expenditures<\/span>. Plan out your short-term financial strategy, including a list of all money that is owed to your business. You should be tracking your expenses and revenue with a bookkeeping<\/span> or accounting software<\/span> to make sure you know your business finances<\/span> in real-time<\/span>. Your financial statements<\/span> should include a balance sheet<\/span> and profit and loss statement. Determine which business expenses<\/span> are the most critical. Lastly, be sure to keep paying the bills that need to be paid, but work with suppliers and creditors to defer expenses to a later date if possible.<\/p>\n<\/li>\n

  3. \n

    Collect all money owed. <\/strong>One of the biggest challenges<\/span> a small business owner<\/span> faces is getting paid for their work and collecting on accounts receivable<\/span>. Inconsistent <\/span>cash flow<\/span> puts your business at financial risk<\/span>. Insist on getting paid upfront or have procedures for timely collections in place<\/a>.<\/p>\n<\/li>\n

  4. \n

    Be honest about your debts<\/strong>. If your business is in a severe financial crisis, you may be tempted to go to a bank and apply for a new business<\/span> loan using false information. Don’t give in to this temptation. Bank loans<\/span> that are granted based on false information are loans obtained by fraud, and you may become personally liable to the creditor for these loans. However, you may be able to negotiate more favorable payment terms<\/span> or reduced interest rates<\/span> with your lender<\/span>.<\/p>\n<\/li>\n

  5. \n

    Don’t try to save business property by transferring it<\/strong>. Many business owners are so desperate for help for their business that they transfer business property to friends and relatives in an attempt to hide these assets from creditors. Many creditors are quite used to tracking these transactions down and reclaiming the property, however. In addition, doing so may land you in legal trouble in the form of civil or even criminal fraud charges.<\/p>\n<\/li>\n

  6. \n

    Don’t pay one creditor over another<\/strong>. The laws of bankruptcy will look into your history of paying creditors and not be kind if you have made a habit of paying some creditors over others. If your business is forced to file for bankruptcy, the bankruptcy court will look into all payments made to creditors in the past year to see if your business gave some creditors preferential treatment. If you are still outside of bankruptcy proceedings, you may legally pay one creditor with an unsecured loan ahead of others, but special treatment is given to secured creditors (creditors that hold property as collateral).<\/p>\n<\/li>\n

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    Keep debt and bank accounts<\/span> separate<\/strong>. If you have taken a loan out from a bank, it would be wise to keep your cash (checking and savings) in other locations. Many loan agreements contain clauses that let banks take money directly from your accounts without notice if you are having financial difficulties, called a “setoff.” If you’re having cash flow<\/span> problems<\/span> already, the last thing you need is to wake up to discover that the bank has emptied your checking account.<\/p>\n<\/li>\n

  8. \n

    Additionally, if you own a corporation or limited liability company (LLC), keep your personal finances<\/span> separate from your business <\/span>bank account<\/span>. Commingling accounts can put your personal assets at risk.<\/p>\n<\/li>\n

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    Renew your insurance<\/strong>. If your business is looking like it will be heading to bankruptcy, you may find it hard to insure your business. Many insurance companies frown on giving insurance to businesses in such proceedings. This is why you will want to renew your insurance contract before starting any type of bankruptcy proceeding. The insurance company cannot cancel your plan if you continue to make timely payments.<\/p>\n<\/li>\n

  10. \n

    Return unwanted leased property<\/strong>. Many businesses often lease property to use in their everyday operation. If your business is using such property, sit down and carefully decide if all of the property is strictly necessary for your business to continue to run. If something is non-essential, consider returning the property to the company that leased it to you. If the property you return is worth more than you owe on the remaining lease, this item will be discharged in bankruptcy. However, if you do need to keep the equipment, be sure to continue making regular payments as this item will not be discharged in a bankruptcy proceeding.<\/p>\n<\/li>\n

  11. \n

    Don\u2019t touch your business’ pension plan.<\/strong> There are many pension plans that do not allow you to remove any money from the account. Other pension plans allow you to remove money, but assess a very hefty penalty for doing so. In addition, the plan could be canceled, meaning that any deductions would be canceled, all the assets in the plan distributed, and all taxes and penalties applied. Yet other plans allow owners to borrow from the plan for specific purposes, but with restrictions. Only choose this option after careful consideration: if you fail to pay the plan back, you will probably face penalties and may have to pay taxes on the money withdrawn.<\/p>\n<\/li>\n

  12. \n

    Look into alternative business funding<\/span><\/strong>. Contact the U.S. Small Business Administration<\/span> (SBA<\/span>)<\/a> for information about their small business loans<\/span><\/a>. Depending on your type of business, you may be able to attract venture capital or angel investors<\/span>.<\/p>\n<\/li>\n

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    Sell your business.<\/strong> This is the final straw. If everything else has failed and bankruptcy does not appear to be an option, you may have to think about selling your business in order to make ends meet.<\/p>\n<\/li>\n

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    Consider bankruptcy protection. <\/strong>There are several bankruptcy options<\/a> to evaluate. Chapter 7 bankruptcy is for business liquidation while Chapter 11 and 13 are for reorganizations. Keep in mind that utilities and leases shouldn’t be a problem during bankruptcy. Typically, a utility company will not shut off your power if your business files for bankruptcy and may only require you to post a deposit to keep the services running. In addition, even though your commercial lease may contain a clause granting the landlord the power to evict if your business files for bankruptcy, he or she cannot normally do so if you continue to pay your rent during the bankruptcy proceedings. These clauses have generally been found invalid unless the tenant is a sublessee or assignee.<\/p>\n<\/li>\n<\/ol>\n

    Get Legal Help<\/h2>\n

    A business attorney<\/a> or bankruptcy lawyer<\/a> can be an invaluable asset for helping you sort through your options. They can review your contracts, debts, and develop a plan of action. They may also be able to negotiate with key creditors and lenders<\/span> and send demand letters to those that owe money to your business.<\/p>\n

    Running a small business is challenging, especially when money is tight, but you can look at strategies to rebuild stability. Keep taxes current to protect your personal liability and seek legal advice before making decisions about bankruptcy or the sale of your business.<\/p>\n\n\n

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