Personal household debt in Ontario has been steadily on the rise over the past 10 years. The 2008 recession proved to many individuals that the idea of dedicating your life to a company in an effort to work towards a good pension is no longer a safe option. Most companies offer little in the way of job stability; this has caused many people to go into business for themselves and has increased the number of small businesses.
The reason we started this article by talking about personal debt is due to the fact that in most cases small business owners find themselves financing their dream of a small business with their personal credit. In Ontario, most financial institutions will not loan money to a small business without the owner personally signing for the debt. Therefore, if the business runs into financial trouble, the business owner will bear personal liability for the debt.
There are three primary reasons that a business owner will go into debt as it relates to their business:
– To finance business growth
– To finance start up
– To keep the business going during times that receivables are down
When business owners use personal credit where their business is concerned, they are taking a major gamble. This risk could have serious consequences not only to their personal finances, but also to their health and relationships. Financial trouble can be the source of incredible stress, the kind of stress that can tear families apart.
Outside of using personal credit or personally signing on business debt, some small business owners will also collect sales tax throughout the year. They use this sales tax to benefit the business and do not set it aside for their annual remittance. Therefore, if the financial situation has not improved by the time taxes are due, the debt increases and this is a debt that the Canada Revenue Agency will demand to have paid in full.
When small business and personal debt compounds, a strong financial plan is the first step to financial recovery. There is help for small business owners who find themselves in financial trouble. The Federal Government offers programs for individuals who are drowning in personal and business debt. Access to these programs and strong financial planning is available through some Financial Advisors.
You will not find this type of financial help through your bank, through a company that lends money or through a trustee in bankruptcy. A good rule of thumb to follow when pursuing a company to help you deal with your debt, is to deal with a company whose only service is to offer financial planning and guidance. If a company lends money then they have an incentive to see that you borrow more. Trustees in bankruptcy and credit counsellors represent your creditors; this means that you cannot count on them for financial advice that represents your best interests. The only way to receive the best advice for you is to work with a company that represents you, and has access to the resources you will need to get debt relief. This will enable you to regain your positive financial standing.