Small Business Debt Relief

Being a small business owner brings numerous rewards. Yet, it’s not without its share of problems, and debt can quickly become a prominent one. When you’re struggling with creditors and seeing your revenues shrink, the situation can feel overwhelming. However, there’s a beacon of hope: Small Business Debt Relief.

Understanding the Problem

Before we delve into the solutions, it’s crucial to understand the problems that lead to business debt.

Declining Revenues

When your small business starts experiencing a downturn, it can quickly lead to a cash flow crisis. Suddenly, there’s never enough money in the bank to meet your obligations.

Debts to Suppliers and CRA

Falling behind on payments to the Canada Revenue Agency (CRA) or your suppliers can further compound your financial difficulties.

Personal Liability

As a small business owner, especially a sole proprietor, you’re personally liable for business debts, including tax debts. This means that your personal financial stability is at risk.

Seeking Professional Help

When the going gets tough, don’t hesitate to seek professional advice. Certified Professional Accountants (CPAs) and Licensed Insolvency Trustees (LITs) can offer invaluable help.

Free Consultation

Most reputable firms would offer a free, no-obligation consultation where they review your business’ financial structure and cash flows.

Expert Analysis

CPAs and LITs use their accounting and operational skills to analyze your business and find solutions. They look at your situation from both business and personal financial perspectives.

Exploring Options for Small Business Debt Relief

Once you’ve got a complete picture of your business’ finances and cash flows, it’s time to explore debt settlement options.

Bankruptcy or Proposal

If your business is in a dire situation, bankruptcy or a proposal might be the best way to get things back on track.

Debt Settlement for Sole Proprietorship

If you’re a sole proprietor, a consumer proposal debt settlement might be a suitable option. This involves freezing all interest and penalties and negotiating a reduced payment plan.

Restructuring for Incorporated Businesses

For incorporated entities, a Division I proposal can provide breathing room to restructure operationally and move forward.

Case Studies

To illustrate how small business debt relief works, let’s look at two hypothetical cases.

Case Study 1: Devon’s Proposal

Devon ran a seasonal painting business smoothly until he received a letter from CRA about his unpaid HST. As a sole proprietor, he was personally liable for this debt. With the help of a LIT, he negotiated a consumer proposal, freezing all interest and penalties. He agreed to pay a monthly amount that was significantly less than the balance he owed, allowing him to continue his business operations.

Case Study 2: Simone’s Restructuring

Simone’s corporation employed 20 people. However, an economic downturn forced her to lay off staff and bills started piling up. After a free consultation with a LIT, they performed an in-depth analysis of her business cash flow and earnings. They advised that her business was viable if she could reduce expenses in certain areas and increase revenues. A Division I proposal was recommended, which allowed her to stay all her current creditors and restructure her business operationally.

Frequently Asked Questions

To further your understanding of small business debt relief, here are some frequently asked questions.


Am I personally responsible for my business tax debt?

If your business is not incorporated, all business debts, including tax debts, are your personal liabilities.

If your business is incorporated, all business debts belong to the corporation. As a director, you’re personally liable for HST and any source deductions owing to CRA on behalf of employees.

Can I continue operating a corporation if I file a personal bankruptcy?

If you file a personal bankruptcy, you can no longer be a director. Once you are out of bankruptcy, you can be re-instated as a director. You may want to consider a consumer proposal instead of bankruptcy to avoid interrupting your directorship.

Am I liable for my spouse’s business debts?

If your spouse’s business is not incorporated, all business debts are his/her personal debts. You are only responsible if you have co-signed/guaranteed any loans or have joint accounts. If the business is incorporated, all business debts belong to the corporation.



Running a small business can be a roller coaster ride. However, if you’re struggling with debt, remember that there are options. Small business debt relief can provide a lifeline, whether you’re a sole proprietor or an incorporated entity. Don’t hesitate to seek professional help and explore your options.

Find Your Personal Debt Relief Solution

Licensed Insolvency Trustees are here to help. Get a free assessment of your options.

Discuss options to get out of debt with a trained & licensed debt relief professional.