Can someone provide a simple explanation of a business loan and what steps are included for a business to fail?

I am writing a novel, and the main character's small business is failing. I want to write this realistically, but I've never owned a business and am not sure how this would work. She has a business loan, so I'm assuming she would be struggling to make these payments. Who would she meet with to be told she is going bankrupt? Or is that someone she would figure out herself?

I've been reading some articles but don't understand the chain of events this involves. If anyone has much experience with this, please share! I'd greatly appreciate it.

3 Answers

  • 2 months ago

    "Catastrophic money shortage" is pretty much a normal state of a growing business when future plans are greater than realistic options today.

    Withdrawing business profits is actually healthy for business and for the owner's health. But not everyone agrees with that, so take it with a grain of salt.

    On another side, withdrawing from places like a cash register can be detrimental. 

    So, what exactly has been going on? 

    Maybe she was withdrawing and re-investing? Is that what the loan is for?

    Amping up a department and not seeing improvement means investment target is off!

    Let's say, the money went into marketing department to increase sales  but in reality if you call the office, no one answers a phone 🤷‍♀️

  • ?
    Lv 6
    2 months ago

    The business owner should know herself if she is going bankrupt.  After all she is there every day and paying the bills.  If her accountant has to tell her she is going bankrupt...then that is the reason.  She was not paying attention to the business...and spent more than she was taking in for months...and then took out the business loan to try to make up the difference and pay the creditors so she could try to stay open... but the loan just added on more debt and an extra monthly payment she could not combined with prior failure to pay attention to the business...current overspending and a failure to manage expenses including taking out a loan for a failing business.....she is going bankrupt.

    So your novel is she smart or stupid.  If she is stupid then she would not have paid attention t the business and would have to have her accountant tell her.  BTW..she probably cannot afford to pay that she is getting this information  as the accountant is quitting..

    If she is smart, she would have gone to the accountant and said...I'm getting deeper and deeper in the red...what can I do to save my business? got plot holes big enough for a planet to fall through....

  • ?
    Lv 7
    2 months ago

    When expenses continue to be bigger than income, and assets are shrinking (laying off needed employees, selling a vehicle or a building, or reducing rented store/business space), and there is consistently no / not enough / money in the bank, an accountant could tell her the future if she was not willing to face the truth herself.

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