All businesses experience financial challenges at one time or another. It is important to keep a close eye, as these normal challenges can quickly turn into financial hardship. There are obvious red flags that your business is experiencing trouble—and there are some warning signals that are less obvious. Here are some of the signs that your business should start to consider corporate restructuring for debt relief in BC.
Warning Signs That May Signal the Need for Corporate Restructuring
Uncontrolled Growth, or Rapid/Unexpected Growth
Business expansion can be a great thing, but uncontrolled growth or growth at an unexpected pace can be bad for business. Growth that happens too quickly or that is not properly managed can cause cash-flow shortages, logistical issues, sales that exceed inventory, staffing problems, and difficulty honoring contracts. Your business is at risk if it is suddenly overextended. Corporate restructuring can get your business back on track.
High Level of Debt
Your business is vulnerable to the unexpected if it is over-leveraged. Debt dependence can also restrain the growth of your business because profits go to servicing debt instead of reinvesting or taking advantage of new opportunities. Another problem is that the higher your debt level, the higher your loan interest rate is likely to be if further borrowing is necessary. Factors such as this put your business on a very slippery slope. Restructuring allows your business to pay back and/or eliminate debt, which in turn frees up profits to put back into growing your business.
Dramatic Decreases in Sales Volume or Revenue
A downturn in sales or revenue is a warning sign you should not ignore. Seasonal variations or expected fluctuations in cyclical industries aside, you should consider corporate restructuring if your business is experiencing steadily decreasing revenue or a decline in sales. Changes in the market or your customer base may be the cause. Your business operations, organizational structure, or internal inefficiencies may be the culprit. Corporate restructuring can help identify problems and implement changes to correct them.
Expenses that Exceed What Your Business Brings In
Out-of-control business expenses are a major red flag. If your business routinely spends more than it brings in, it will face cash flow shortages and can get you into trouble with suppliers, the CRA, etc. Imbalance caused by unprofitable contracts, unnecessary costs, or high-interest debt makes your business less able to weather inevitable downturns or fluctuations. The process of corporate restructuring can address excessive costs and expenses, restoring balance and the potential for profitability.
These are just some of the signs that can indicate your business is in trouble. Every business is unique. If your business is currently experiencing financial hardship or you are concerned that trouble is looming, it is highly recommended that you consult with a Licensed Insolvency Trustee (LIT) to explore corporate restructuring and other debt solutions.
What Corporate Restructuring Options Are Available?
There are several corporate restructuring options to consider if your business is facing financial difficulties. Corporate restructuring can be done formally or informally. If you are interested in the differences between the two, please see here for more from our Licensed Insolvency Trustees on how to decide between informal and formal corporate restructuring.
Formal corporate restructuring can be done under the Bankruptcy and Insolvency Act (“BIA”) or under the Companies’ Creditors Arrangement Act (“CCAA”). In addition to corporate restructuring, you should be aware that there are other debt relief options to explore. Our Licensed Insolvency Trustees provide a full range of services including turnaround management, business viability reviews, performance improvement, asset realization and estate management. We can review your situation and give you objective advice on the best strategy for your business.
Get Corporate Restructuring Advice from a Licensed Insolvency Trustee
Don’t ignore the warning signs. Take action and address corporate financial troubles today. Contact Crowe MacKay & Companyto book a consultation with one of our Licensed Insolvency Trustees in Vancouver and Surrey. Corporate restructuring—informal or formal—is just one of the range of options we can help you explore if your goal is to get some breathing room for your business. Our LITs will work with you to explore the pros and cons of each option and help you decide which debt relief solution is right for your business. Crowe MacKay & Company provides trusted advice to businesses of all sizes and across all industries. Drawing on our significant industry and sector knowledge, we are committed to providing our clients with creative, effective and objective advice to resolve their financial difficulties. Contact us today to discuss your company’s financial circumstances and get started on a customized strategy for your business.
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This article has been published for general information. You should always contact your trusted advisor for specific guidance pertaining to your individual needs. This publication is not a substitute for obtaining personalized advice.
If you require corporate or personal Insolvency services, Crowe MacKay & Company provides custom solutions for clients, allowing them to live debt-free.
