14.5.2024 13:31

Entrepreneur, don’t face the threat of bankruptcy alone

Tiina Toivonen, Manager of Legislative Affairs at Suomen Yrittäjät, points out that bankruptcies are part of entrepreneurship and not the end of the world or of being an entrepreneur. Where possible, she encourages tackling the company's financial difficulties early in order to avoid bankruptcy.

Measured in April, the number of bankruptcies in the last 12 months was 16% higher than in the previous 12 months, and the situation is still not improving.

“According to our estimate, the number of demands for payment with bankruptcy threats and bankruptcy petitions will remain high until at least the beginning of the year,” says Tiina Toivonen, Manager of Legislative Affairs at Suomen Yrittäjät.

Construction companies are still struggling, but bankruptcies can also be expected in the commerce and service sectors. According to Toivonen, there are many reasons for the bankruptcies, such as financially difficult times after the COVID-19 pandemic, high interest rates and increased costs of raw materials.

“The extensive and several weeks-long strikes have not made the situation easier for companies,” Toivonen points out.

Declaring bankruptcy

The creditor or the company itself can file a bankruptcy petition, and the matter is always decided by a court. The petition is made to the district court where the debtor company is based. A district court may declare a company bankrupt if it is more than temporarily unable to pay its debts when they are due. This means that the debtor must be insolvent to be declared bankrupt, that is, more than temporarily unable to pay their debts.

There may also be an alternative to bankruptcy. If the company is insolvent, it is sometimes possible to revive and organise the business so that it does not have to be stopped. Such official procedures include business restructuring and debt arrangements for a trader. It is important to start these business rehabilitation procedures early, before the insolvency worsens.

Toivonen encourages entrepreneurs to start rehabilitation measures in time, seek help and agree on the payment of invoices.

“It’s normal that a difficult financial situation feels shameful and that unpaid bills are hard to tackle. Entrepreneurs often act too late, when the company can no longer be helped to overcome its financial difficulties, and things have reached the point of bankruptcy and ending the business.”

Tiina Toivonen emphasizes that bankruptcy can be the beginning of something new. She encourages entrepreneurs to react to financial difficulties immediately.

Bankruptcy is also a new beginning

Bankruptcy is much more than a statutory procedure. Behind the processes and structures, there is always a person; an entrepreneur and their friends and family. A sense of failure often comes with bankruptcy, which can cause feelings of despair, disappointment, shame, anger and sadness.

In all of this, it is important to remember that bankruptcy is not a sign that you are unfit as an entrepreneur or as a person. Bankruptcy is not a crime either. Bankruptcy is often a result of things that are beyond the entrepreneur’s control. This is especially the case in situations like the coronavirus pandemic or serious illness.

According to studies, entrepreneurs who have faced bankruptcy are more successful than others on their second try.

“For example, in North America, you aren’t an entrepreneur at all if you haven’t gone through bankruptcy and its trials.”

Tiina Toivonen feels that the attitude towards bankruptcy is also healthier in Finland nowadays. Bankruptcy is not rare and it is part of entrepreneurship. Bankruptcy can also be a new beginning.

New business after bankruptcy

Bankruptcy does not prevent you from starting a new business or restarting your business. However, starting a business can become more difficult. An entrepreneur who has experienced bankruptcy may have difficulties in registering their new company in the Prepayment Register. The entrepreneur’s own possible payment default entries may also make business operations more difficult.

Suomen Yrittäjät has been pushing for legislative changes for a long time to better enable entrepreneurs to begin again and start a new business.

Where to find help for financial difficulties and bankruptcy?

Office of the Bankruptcy Ombudsman
A special authority responsible for supervising the administration of bankruptcy estates. More information (tel. 02956 65111)

Yrittäjän talousapu counselling service
Confidential and free counselling for financial and payment difficulties. More information (tel. 0295 024 880)

MIELI Mental Health Finland
The Crisis Helpline provides 24/7 help and support during difficult times. The service is available in several languages. More information (tel. 09 2525 0111)

Suomen Yrittäjät counselling services
A free service for members, available by phone from 8 a.m.–6 p.m. on weekdays. More information (tel. 09 229 221)

You can find help for financially difficult situations from the Suomen Yrittäjät information bank.

TEXT Jaana Tihtonen and Suomen Yrittäjät
PICTURES Adobe Stock, Johanna Erjonsalo and Jetro Stavén