9 Reasons to File a Consumer Proposal instead of Personal Bankruptcy
1 year ago

In my 30+ years as a Trustee, I have seen many entrepreneurs and small business owners in financial difficulty. What they need is help.


Some have a business that cannot (or should not) be saved and others have businesses that we try to restructure so that they can move forward, continuing to provide a livelihood for the owners and their employees. Part of what we do is to help the business owner understand and accept whether there is a viable business or not and to deal with the consequences accordingly.


Businesses start with optimism

Businesses begin with optimism or they don’t start at all. But starting a business and managing it through growth takes many different skills and most individuals do not have ALL those skills when they start out and usually can’t afford to buy professional services to supplement their own weaknesses.


Starting out, the small business owner is chief executive officer, chief financial officer, chief technology officer, head of human resources, shipper, receiver, accounts payable clerk, accounts receivable clerk, accountant, customer service rep, head of production, plant manager, scheduler, worker of all hours for no extra compensation, etc.


As the business grows, it is possible to hire employees to deal with some of these functions but the entrepreneur must still understand ALL of these functions in order to manage their business and employees. Lack of fundamental business management skills can pose a significant risk to startups, small businesses, and even mature businesses.


Risk is the currency of business success

Then, on top of the significant skills that a small business owner needs, he or she faces considerable financial risk. Often, there is little or no traditional bank financing available for small businesses. Many resort to personal credit cards, mortgage funds, investment from family and friends, etc. in order to finance the startup and growth of a small business. Very risky. Very common.


Then, when the business actually starts to qualify for more traditional financing, the business owner is usually required to provide a personal guarantee for the financing. The business owner’s personal financial position (and often that of his/her spouse) is tied directly to the success or failure of the business.


Insolvency is designed for progress, not punishment

Why are we talking about this? Because we believe that entrepreneurs should be encouraged and supported, particularly when they run into financial difficulty. They take risks that many people will not take in order to try to create prosperity and employment for themselves and others.


Many struggle and fail in the endeavour or abandon it. However, every large business has its roots in one or more small businesses and one or more entrepreneurs. So, if we want more people to be employed and our economy to grow, we need entrepreneurs to take those risks and develop businesses.  Failure is not to be reviled; it is a learning experience on the winding path to success.


It is tough being an entrepreneur and small business owner, but it can be very rewarding.  When things aren’t working right or the business fails, the insolvency system is there to help get you back on track or restructure to move forward again.


The earlier you seek to resolve a difficult situation the more options that are generally available.  Licensed Insolvency Trustees across Canada have the experience and perspective to help small businesses and their owners resolve financial difficulties. When trouble looms, look for someone with this experience and also with a sense for what you’ve been through and how much you want to make it work.