With over half of all new companies failing in the first five years of trading, it is common for business owners to find themselves in financial distress. However, if you find yourself in a position where you are unable to pay bills on time and have more liabilities than assets on your balance sheet, then you have officially become insolvent.

However, not all insolvent companies must close for business. There are steps that you can take to work your way out of insolvency.

Contact Your Creditors

Avoiding the calls from your creditors will only infuriate them, making matters worse. Instead show them you are aware of the issue and you are taking proactive steps to overcome it. Take the lead by contacting them. If you can, negotiate for more time, and make a manageable payment agreement.

Inject Money from Other Sources

Whether it’s your personal savings, a credit card or a loan from friends or family, a cash injection may be all you need to get out of a financial hole. This is risky, as there are no guarantees that you will be in a position to pay the money back – so be sure to use it wisely. The other option is to ask for investment in exchange for shares in your company. This may be a good thing to offer to your staff. It will then give them a vested interest in your company. However, make sure not to demoralise your employees with your financial woes.

Get Legal Advice

Depending on the severity of your insolvency, you may want to employ the services of a lawyer from a Cayman Islands law firm to help you out of the hole. Insolvency lawyers can help get creditors off your back and start the ball rolling for bankruptcy if necessary.

Ask for Time

If the creditor you are struggling to pay is the IRS, you should contact them immediately and discuss your financial difficulties. The IRS also has an Online Payment Agreement Tool which can be a handy way of managing the debt. The IRS are always keen to work with taxpayers who are suffering financial hardship.

Consider Finance Options

If you have unpaid invoices due, you could consider invoice financing. The way this works is a third party will effectively buy your unpaid invoices for an upfront fee of around 85 percent of their value. They will then be responsible for collecting payment when it is due and pay you the balance, minus a small fee. This is often a great way to get your hands on some much-needed capital.

Restructure the Business

Often simply restructuring a business can help lift it out of financial troubles and set it on a more profitable path for the future. Restructuring involves everything from staffing levels and potential outsourcing opportunities to downsizing, relocating and renegotiating existing contracts.

Act Quickly

Get a plan in place quickly, but don’t go into panic mode. Make sure the cost-saving decisions you make now won’t cause your business to deteriorate down the road. Give yourself a realistic timeline to see if your plans are working and the business is turning around.