Business Bankruptcy Options and Alternatives

Thousands of business owners find themselves in a hole every year. Understand that you are far from the only person in this position and for the majority of business owners, there is an easier way out than declaring personal bankruptcy. While it’s scary to look at the prospect of not being able to make payroll or to think that you’re putting your home and other personal assets at risk, the majority of business owners find that there are options in getting out of the hole they find themselves in.

Turn your business cash flow back positive

For the majority of business owners, the main deterrent to positive cash flow on their income statement is servicing the debt.

In order to remove the debt from your business, having a qualified consultants on your team that either knows how to turn a business around, knows how to administer a short sale or can successfully put your business through a chapter 11 proceeding is a must.

Left to their own devices, the majority of business owners don’t know how to remove a businesses debt and will do one of three things:

  • Reduce marketing expenses or cut them entirely
    • This may help in the short term, but the decrease in future cash flow means that the business will be in an even deeper hole in a month.
  • Take out a merchant cash advance (MCA) 
    • These stack up fast and you’ll just be kicking the can down the road a couple of months
  • Try to get more clients and get them to pay up front.
    • This is only a solution if you can get the clients for free, they still pay in full and you have the ability to stretch this cash long enough to perform your service.
While it may seem like these are good ways to reduce debt. More often than not, the problem is just being pushed back a couple of months and is not dealt with completely.
If you are looking to seriously turn around a business with cash flow issues, you likely need to remove some of the liabilities that are currently plaguing your cash flow, primarily debt. There is rarely much room to cut back on salaries, you likely won’t be able to negotiate much better lease terms any meaningful amount and your utilities and communication expenses aren’t going to change at all. There is one large liability however that IS negotiable. This is your business debt.
While commercial lenders and banks may tell you that there is no room to move and that they either get paid or they foreclose on your assets, this is almost never the case.
If you hire a qualified restructuring consultant, they will advise you one one of four paths to take. These paths are: 
  • Renegotiating your business debt and payables. This is typically the first step that is taken when trying to free up a businesses cash flow. If debt is successfully renegotiated, there may not be any reason to pursue further steps.
  • Restructuring the company through a UCC article 9 short sale proceeding or a chapter 11 business bankruptcy proceeding.
  • Liquidate the business assets to pay the creditors. While this is not your first choice, the business assets could be liquidated through a chapter 7 bankruptcy to pay back creditors.

Remove My Business Debt

We will work with business owner’s to renegotiate or remove their business debt. We typically take a portion of the equity as payment.

We will only work with businesses that have at least $1M in revenue. If you meet this criteria, please feel free to share the details of your business here:



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Finding what went wrong in your income statement

The first step we make with a distressed business is to diagnose what is hampering the cash flow. The majority of the time there is a nominal debt payment taken out each month for either an SBA loan or a merchant cash advance and the business would be profitable if it was not for that payment. 

While these loans are typically secured against a business asset and sometimes a personal asset, they can almost always be renegotiated. It is important to understand that the lender does NOT want to foreclose on your asset. 

Your lender would like you to continue operating your business and be able to pay your debt, even if it takes longer for them to get their money back and they make less profit. This is also true if you are repaying a liability to a trade creditor or supplier.

It is simply too costly for your lender to seize your assets and liquidate them. There are legal proceedings they have to go through and even once they liquidate the asset, they likely won’t get more than 50 cents on the dollar back.

How to renegotiate your business debt

Around half of the businesses we see that are in trouble are in that position because they have more debt than their business can support. Often times, business owners will take out a loan thinking that their current trajectory will continue indefinitely. However, there are hard times that hit all businesses and leave many business owners with more debt than their cash flow can pay off.

It is often commonplace for small and mid-sized businesses to take out a second loan to pay off the first. And…you guessed it, a third to pay off the second. We’ve seen as many as 8 merchant cash advance loans in a business at a time.

Personal guarantees and how to work around them

The personal guarantee you signed may be haunting you now. Understand that in the vast majority of cases, business owners can structure the business in such a way that they repay the lenders over a period of time and remove the personal guarantee. This may mean a chapter 11 business bankruptcy, an article 9 UCC short sale to a new owner and/or a renegotiating terms with your lender.

In most cases, your lenders don’t want to foreclose on your personal assets. If you give them an easier alternative where they recover as much of their capital, they will most likely take that option.

Keep your home and personal assets safe. Removing personal guarantees is doable. See how Minerva operates as a turnaround consultant and help businesses restructure and remove debt.

See Also:

For more information on the mechanics of SBA loans and how to restructure them with various banks, read this article.

Moving on from a business law suit

Law suit is the second most common killer of main street and lower mid-market businesses. If you are a business that has a settlement ruled against you, you are typically limited in the steps that you can take in regards to paying the settlement. An administrative process such as chapter 11 may be the best option.

In some cases, your liability insurance or another general business insurance policy will cover all or much of your payment. It is unlikely that we will be able to remove the penalty entirely. However, restructuring the business so that it drives enough cash flow to service the debt is typically doable. 

Turnaround a business and cut costs during a recession

While cyclical and broad recessions are challenging environments to operate in, there are cases of businesses using them to their advantage. One tactic that we at Minerva typically employ during recessions is to acquire or invest in competitors in the same industry.

It is important to understand that if your business is having cash flow problems due to a recession, so are your competitors. We will typically help companies that we invest in to acquire their competitors in this climate.


If you are looking to learn more about the various debt restructuring options that may be available to you? Have a look at our article on business debt restructuring.