Small business financial assessment
Several months ago through my referral network, I was asked to contact a small business client in financial trouble who did not want to go bankrupt. After an initial phone call to assess their financial difficulties, they decided to come into my office and meet me for their free consultation.
Upon looking into the business situation further it was clear that the business and its owners were in dire circumstances and near bankruptcy, while creditors continued to collect, seize bank accounts, bringing them closer to having to collapse the business permanently.
The business owners were desperate to survive; this was their only source of income and they were trying to protect their livelihood from going under. They began liquidating business assets, even those needed to operate, in order to try and pay its creditors. After the sales, the business no longer had the right equipment to continue to operate, which of course was actually causing their revenues to fall! To make matters worse, there was still a substantial amount of debt to be paid and with no plan, there was no hope of the business surviving.
The clients owed in excess of $270,000 of unsecured supplier debt and bank notes as well as another $80,000 of CRA debt that had secured a lien on their personal property.
What can a plan do?
After a few days a detailed plan was developed for this client. Corporate plans are complex. They take a lot of work and attention to detail to ensure a company can remain operational without the burden of excessive debt restricting their cash-flow.
The 4 Pillars Small Business Debt Restructuring Plan was used and we were able to eliminate over $250,000 of unsecured debt and remove the CRA tax lien from their residential home. At first they were skeptical, but once the plan was fully explained they were eager to start as quickly as possible, before the company was forced into bankruptcy by its creditors.
Where does the plan start?
The first part of any plan, especially when CRA is owed, is to make sure all tax remittances for the business are up to date. It is important the businesses build a positive track record of paying their taxes as they come due if they want CRA to support any small business debt restructuring plan. In addition, provisional tax returns were completed for the business owners’ personal taxes so that any amounts owing would be captured up until the date of filing.
New banking relationships were established so that they could protect themselves from further creditor actions. In order to be fair to the creditors, asset appraisals were conducted on all personal and business assets. Finally, the clients needed to make sure that they were able to find new suppliers for the business so that the day-to-day operations would not be affected moving forward.
Small business creditor restructuring
Once everything was in place the offer from my clients to their creditors was submitted and a monthly payment plan over 5 years totaling $90,000, paid interest and penalty free, was agreed. As part of the small business restructuring plan CRA was required to remove the $80,000 lien against the house and a one-time payment of $10,000 was accepted.
Since the business had dramatically restructured its tax and liability situation, it qualified for a small business loan through the Phoenix Fund to assist in its repayment to its creditors.
How is the company different, you ask?
Our clients were able to keep their business operating without the risk of bankruptcy, create positive operational cash-flow, stop the sale of its business assets and halt the bank account garnishments. This has allowed the business to focus on building revenue instead of being pressured by creditor harassment.
They went from being insolvent with an $80,000 CRA lien on their residential home with no hopes of any future equity, to now having a chance to create wealth through home ownership. They have, through the small business debt restructuring plan, kept all of the business assets, personal assets, and their residential home.
Here is what the clients had to say about 4 Pillars, Kitchener, ON
“As a small business owner I went to 4 Pillars with mixed emotions about what to do about my financial situation. Scott was able to give me direction and stability with the financial plan he provided me. My debt was reduced from over $350,000 down to $90,000. The government also had a lien against my home which Scott was able to have removed as well. With Scott’s knowledge and hard work my proposal was accepted and I am now looking forward to a much more secure and stress free future”.
Scott Patton
Debt Relief Specialist
Kitchener, ON
