AS operational costs rise and cash flows tighten, the Jamaica Business Development Corporation (JBDC) has urged micro, small, and medium-sized enterprises (MSMEs) to act early on signs of financial distress to avoid bankruptcy.

The caution came during the JBDC’s most recent Virtual Biz Zone webinar themed ‘Debt Alarm: Identifying the Signs of Financial Distress’. The session, held in collaboration with the Office of the Government Trustee (OGT), aimed to provide entrepreneurs with practical tools to recognise and address early financial warning signs to prevent business collapse.

Speaking at the webinar, government trustee at the OGT Elece Campbell compared financial management to maintaining a vehicle — stressing that many business owners ignore obvious red flags until breakdown becomes inevitable.

“You don’t want to see that the tyre pressure is low and you’re still driving. That’s what many of us are doing with our finances — ignoring the warning lights until the car breaks down,” she said.

Some of the key red flags preceding bankruptcy, she said, were repeated missed payment of bills; minimum payments on credit cards or loans, using borrowed funds to cover daily expenses; crediting essential items such as food and utilities; increasing debt month over month; and avoiding financial conversations or ignoring calls from creditors.

Underscoring the dangers of financial distress, which usually builds gradually, Campbell said the cost of delay can be high — not just in dollars, but also in credit score damage, legal risks, and mental health strain.

Acting JBDC CEO Harold Davis, reinforcing the agency’s commitment to strengthening financial resilience among MSMEs, regarded this as a very critical step.

“Access to financing is a challenge, but managing that financing is just as critical and debt management must be part of the equation,” Davis noted.

He explained that JBDC continues to bridge the gap between MSMEs and financial institutions by promoting financial literacy, particularly through initiatives like the Biz Zone series. These efforts are crucial in Jamaica, where many MSMEs operate informally with thin margins and limited financial buffers.

The International Finance Corporation’s (IFC) 2024 MSME Financing Gap Report highlights similar vulnerabilities, noting that in developing economies like Jamaica’s businesses often struggle to access affordable credit due to informality and lack of collateral.

In light of these findings Davis said the JBDC’s goal is, therefore, not to only ensure that MSMEs access the appropriate financing solutions, but also that they are prepared to sustain their businesses through this process.

“In our financial literacy initiatives we expose our clients to various forms of financing. Realistically, we know that within a Jamaica context a most common form might be a loan, and so debt management becomes significant,” he said.

As both the JBDC and OGT urged business owners to treat debt warning signs seriously, Campbell further summed up the message with practical advice.

“We want to promote early intervention and we try to help businesses to prevent their debt from worsening, but there are times when it cannot be helped, and that is why we have the OGT,” Campbell said as she reminded entrepreneurs about the office’s ability to provide legal and advisory support for those already facing financial distress under the Insolvency Act.

As an agency of the Ministry of Industry, Investment & Commerce (MIIC), the OGT is mandated to assist debtors, assess their financial position, and prepare and file applications with the supervisor of insolvency for the implementation of proposals or the administration in bankruptcy on debtors’ behalf.

Once appointed to act with respect to their estates, the trustee conducts further investigations into the debtors’ affairs; receives, verifies, and admits claims by their creditors; identifies, recovers, and manages or disposes of their assets; collects payments and invests estates funds; and, as soon as reasonably practicable, prepares and processes dividend payments to creditors in full or partial satisfaction of their debts.

In addition to direct support, the office also actively educates the public on the provisions of the Insolvency Act and promotes the use of its cost-effective services for those experiencing financial difficulties.

Elece Campbell, government trustee at the OGT