How a Business Went Bankrupt from Credit Debt

Posted by: Sally S. | Nov 14,2007

Consumers often wonder how a business can go bankrupt from credit debt. It’s easy to assume that companies rip off their customers or lack proper planning, causing them to go under. But a lot of the time, businesses that go bankrupt due to credit debt were working their hardest to stay profitable and were let down by someone else. Here’s an example:

 

A local printing business who did work for companies all over the metro area went bankrupt due to credit debt. The people who owned and worked for the company worked hard, and produced high-quality products. Unfortunately, a large pharmaceutical company who owed them several hundred thousand dollars went under. And that started a very unfortunate chain reaction resulting in the printing business going bankrupt- and landing in serious credit debt.

 

Unfortunately, when you have a lot of your eggs in one basket, losing a major client can be your downfall. When the printing business lost the pharmaceutical company and realized they wouldn’t be paid for the work they had done they had close up their shop.

 

When you own your own business, you want to be easy going with clients, allowing them to pay you on their schedule. But this only works when you don’t end up wallowing in debt. It’s ok to ask for part of the money upfront, and to set up a payment schedule to continue getting paid while you work on the project. This way, you can keep up with your office supply needs, payroll and other business expenses without overextending your credit debt. And, even if your biggest client goes under, you’ll have at least some of the money they owe you, so your business won’t go bankrupt.

 

Learn more about how to keep your business debt-free.

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