Three signs your business may need restructuring and what to do about it

Running a business comes with risks, and no one knows that better than the people who’ve put everything into keeping their business alive. When things get tough, it’s often not because of a single decision but a slow build-up of pressure from rising costs, declining revenue, or a few missed payments that turn into many. It’s easy to believe the worst is temporary, and things will turn around with a little more time.

However, knowing when to seek support is one of the most critical decisions a business owner can make. Recognizing the warning signs early can mean the difference between finding a way forward or being forced to close.

Here are three key signs that suggest a business may need to consider restructuring — and what options may still be on the table if you act early.

1. You’ve stopped remitting to the CRA

One of the earliest signs a business may be struggling is a growing balance owed to the Canada Revenue Agency (CRA). These amounts — whether payroll deductions, GST/HST, or corporate taxes — are easily delayed when cash is tight and other payments feel more immediate.

For many owners, the intention is to catch up quickly. But if receivables slow down, a key customer leaves, or monthly costs continue to rise, those deferred payments can quietly stack up. Some businesses don’t realize how far behind they are until the number becomes overwhelming.

However, when it comes to the CRA, it’s not just the amount that matters but the agency’s expanded powers. The CRA is often silent as the debt continues to mount. Yet, it expects full repayment at a time when it seems it is never opportune for the business. The CRA is willing to negotiate a repayment plan, but if balances go unresolved or payments are missed, the agency has tools that can escalate matters quickly, such as freezing bank accounts or garnishing accounts receivable with little warning.

Owners may have made the best decisions they could at the time — based on uncertainty, optimism, or difficult trade-offs. The next course of action is to try to understand what caused it, make the appropriate financial and operational adjustments, and update your cash flow model to address the CRA arrears and ongoing remittances. Now, if the amounts are growing and repayment feels out of reach, don’t wait for enforcement action. A restructuring advisor can help you assess options before it’s too late.

2. Relying on your line of credit as a lifeline

Lines of credit are meant to be a safety net, not a survival tool. In a healthy business, they help bridge temporary gaps, such as during seasonal revenue dips or while waiting on client payments. When that line is maxed out month after month, it becomes a sign that the business is operating without a buffer.

There are red flags that show up long before a line of credit runs dry. Business owners may find themselves unsure each week if they can cover payroll or rent. Or you may begin using credit to fund long-term purchases, such as machinery and equipment, rather than seeking appropriate financing options like loans or leases. That misalignment between long-term assets and short-term debt puts further strain on cash flow.

A strong balance sheet can help realign priorities. For example, refinancing long-term assets instead of using a short-term credit facility can free up line of credit availability to cover temporary gaps in daily operations. But identifying these options requires stepping back — and asking whether the business is truly using its financial tools as intended or patching over deeper problems with short-term fixes.

3. Trade payables are aging past 60 days

Another common sign of trouble is the growing delay in paying trade suppliers. Generally, businesses settle trade payables within 30 to 60 days. When invoices begin aging past 60 days, and that column continues to grow, especially past 90 days, it’s a sign that the company may be running out of room to maneuver.

Some businesses become reactive, paying only those who press the hardest. Others may defer payments to vendors they assume they won’t need again soon. This patchwork approach can buy time but doesn’t solve the core issue.

Payables data can tell a powerful story. If a business consistently pushes more payments into the overdue column, its relationships with suppliers may soon be strained or cut off entirely. That can lead to operational disruptions, stalled production, and reputational damage, further eroding recovery chances.

Aging payables often represent an earlier stage of distress. When addressed promptly, there’s still room to repair relationships and realign cash flow strategies. Similarly to the CRA arrears, understanding the root cause, making adjustments accordingly, and updating your cash flow model allows the opportunity to realign the business before it’s too late.

What happens next?

When restructuring professionals meet with clients, they don’t just look at the financials. They consider the whole picture. Is the business still viable? Are there real opportunities to improve cash flow, refinance debt, or restructure the balance sheet? And just as importantly, is the owner ready to put in the time, energy, and resources to rebuild?

Restructuring isn’t easy. It can take months, even years, to regain stability. But it offers a path forward for those willing to make the changes. Many successful restructurings happen quietly, behind the scenes, through informal negotiations with banks, creditors, and advisors. These options make a difference.

Other times, when informal restructuring isn’t enough, more formal tools such as the Bankruptcy and Insolvency Act (BIA) or Companies’ Creditors Arrangement Act (CCAA) may come into play. These formal legal processes can help a company restructure while protecting it from creditors.

Why early action matters

One of the biggest challenges for struggling business owners is timing. Most don’t seek help until they feel they’ve exhausted every option, but by that point, it’s often too late to preserve what matters most.

Business failure doesn’t usually result from one wrong move — it’s the slow accumulation of missed warning signs. The earlier an owner acknowledges the problem and seeks support, the more options they’ll have to fix it. Waiting until debts snowball, vendor relationships sour, or the CRA takes action can eliminate those possibilities.

Financial stress can feel isolating, but help is available — and it’s not about assigning blame. It’s about bringing in professionals who understand the landscape, can help reassess priorities, and know how to navigate recovery with clarity and discretion.

If your business is behind on remittances, leaning too hard on credit, or falling further behind on supplier payments, these aren’t just red flags — they’re opportunities to ask for help before the path narrows. Restructuring doesn’t mean failure. It means taking a different route to keep moving forward.

A Licensed Insolvency Trustee (LIT) like MNP Ltd. can help you assess your options, whether that means restructuring or reducing debt through a formal proposal. Reach out for a confidential consultation and take the first step towards regaining control of your business’s financial health.