Deciding to embark upon entrepreneurship is a brave endeavor considering that many new businesses do not make it past the first year before they crash or run out of money. Coming to terms with the reality that your small business is close to bankruptcy is a devastating experience, however it is one that a large majority of entrepreneurs eventually must face. Nevertheless, if you lack the cash to cover expenses, and revenues are falling, it may be an option that you cannot avoid. However, there are some options you can try before you actually file in court that can buy you time and give you a glimmer of hope for saving your business. If you aren’t ready to surrender, read on for a few ideas alternatives you can try before you actually file for bankruptcy.

Cut Expenses

Although your cash flow problems may appear insurmountable, a cash flow analysis that details exactly where your money is going may reveal ways to decrease cash outlays for a while. Determine what items are non-negotiable, then talk to your other creditors and try to arrange payment plans. If you can convince them that your cash flow problems are temporary, they may agree to accept an interest-only payment plan until you are back on your feet. Generally, your suppliers would rather have some money from you than nothing at all.

Collect what you are Owed

If your business is struggling due to unpaid invoices, it is time to be assertive about collecting what you are owed. Call the people who owe you money, explain your situation and tell them that it is no longer feasible for you to wait to be paid. If this strategy fails, consider sending the account to a collection agency. Be aware, however, that agencies take 25 to 40 percent of what they collect as their fee. A better option may be suing in small claims court. A judgment from the court entitles you to additional legal remedies to collect the debt.

Pay Your Payroll Taxes

Payroll taxes are non-negotiable and accrue penalties and interest at an alarming rate. Additionally, even if your business is a partnership or corporation, the government can hold you personally responsible for any unpaid tax debt. Federal taxes cannot be discharged in a bankruptcy, so it is best to pay your payroll taxes in full if you can. If you don’t handle your own taxes, be sure to talk with your accountant to be absolutely certain that everything regarding your taxes is properly in place and above board.

Consider Crowdfunding

According to the research company Massolution, entrepreneurs and non-profits raised over $5 billion on crowdfunding sites in 2013. What is crowdfunding? You pitch your company and declare your financial need on a website like Crowdrise or Indegogo and ask people to donate to help you remain afloat. If your business is worth saving, you may get enough cash to keep you going until the crisis is past. According the website CraigsConnect, fundraising teams each raised an average of just under $10,000 with crowdfunding in 2013. Successful business people with deep pockets are often interested in helping new start-ups to stay afloat, so come up with a great pitch for your company and see if you can find a few backers to help keep you in business.

Get the Facts

If bankruptcy appears inevitable, contact an attorney to discuss your options as soon as you can. A number of different bankruptcy options for small business owners are available to guide you through this disappointing and often stressful process. These range from total liquidation under Chapter 7 to business reorganization, which keeps your business going as you rebuild, under Chapter 11. Chapter 12, a bankruptcy specifically for family farmers and fisherman, or Chapter 13, an option typically reserved for individuals but open to sole proprietorships, also may apply to you. Out of court debt restructuring also is an option, but it can be a risky one. Many so-called debt-consolidation firms are extremely unscrupulous. Check with the Better Business Bureau and your attorney before taking this route. No matter what type of business you are running, there will by a type of bankruptcy that is suitable for you over others. Don’t try to navigate these waters on your own—consult a professional so that you don’t lose any more money than absolutely necessary.

Facing bankruptcy is unpleasant and challenging, but financial woes do not mean that your business is doomed. Bankruptcy may be a path to paying off your creditors and restoring your business later on. Credit counseling services or your attorney can assist you in re-building your credit and your reputation over time. The information for this article was provided by the professionals of Abakhan & Associates Inc. who specialize in bankruptcy in Kelowna.