Liquidation of a company is one of the most powerful legal things that a business owner can do. Dealing with company debt can be incredibly stressful, especially when creditors are relentless, and there is not enough cash flow to turn the situation around. If your business cannot pay its debts, liquidation is a viable option that should be considered sooner rather than later. Continuing to operate a debt-ridden business only prolongs the pressure and risks losing everything, including personal assets. Liquidation almost immediately frees you not only from the stress and worry, but also allows your business to continue mostly unfettered.
It is painful to own a business that experiences cash flow problems where creditors call you every day and you have no answers. Sleepless nights, fear, and worry that you may lose your business and your assets put tremendous stress on your shoulders. All this while you are trying to overcome the pressure of running your business. You may also worry that you can lose your personal assets such as your house and furniture. Even worse, you may fear that SARS may take legal action or take what money you still have!
The alternatives to Liquidation
While liquidation is a quick and practical solution, some business owners may hesitate to take this step. If you are unsure, consider the alternatives:
- Business Rescue: Although it may seem like a good idea, it is expensive and involves handing control of your business to an outsider. Without a significant and immediate increase in income, many businesses in rescue eventually face liquidation. If the core problem is not solved, business rescue will not magically fix the problem, it will merely delay the problem.
- Paying the Debt: This is only feasible if your business can generate enough cash flow to meet its obligations, which is often not the case for struggling businesses. That is probably why you are considering liquidation.
- Doing Nothing: Ignoring the problem only leads to growing debt and additional interest and penalties. Creditors will eventually take legal action, and the business will grind to a halt.
- Selling Off Assets: This may provide short-term relief, but it often leaves the business unable to operate effectively. Additionally, the proceeds from the sale may not fully cover the outstanding debt.
- Payment Arrangements: While creditors may agree to a repayment plan, a lot of them do not want to. Even if there are repayment plans in place, it leaves the business burdened with ongoing debt which it couldn’t afford in the first place. A single bad month can derail these arrangements, putting you back at square one.
- Borrow money to keep the business afloat – this is one of the worst mistakes many business owners make. The more you borrow, the more you have to pay back, the more you increase the debt problem. Also, many business owners take loans on their property and in their personal names, never take a salary and only once they run out of opportunities to borrow money do they consider to stop and liquidate. By then the damage is done and both the business as well as the business owner is debt ridden and both have lost everything. It is just not worth it.
Voluntary Liquidation - the Better Choice
The aforementioned options usually only delay the inevitable and sometimes increase the problems. It is very hard to trade out of debt (that is why business rescue fails a lot of the times). It gets too expensive to pay back more and more debt. Unless something drastic happens like a big cash flow injection (and we do not mean a loan), for many (if not most) businesses, liquidation is the most efficient way to eliminate debt and secure a fresh start. It is a speed and almost immediately resolution to a debt problem.
Liquidation: The Fastest Path to Freedom from Debt and Creditor Harassment
Liquidation provides immediate relief by putting an end to creditor harassment and freezing debt accumulation, including SARS penalties. The process is straightforward and, when done correctly, can allow a business owner to restructure and rebuild under a new entity. It offers the quickest route to a solution, enabling you to focus on growing a new venture without the weight of past debt.
If your business is overwhelmed by debt and none of the alternatives seem viable, consider liquidation as a way to turn things around. Acting quickly can help protect your assets and give you the opportunity to trade again under better circumstances.
