Operating a business in a weak economy can be quite challenging. This can be especially true for start-up companies which usually require significant initial funding to bring their services or products to the market. Sometimes a business, after receiving this funding, will require additional investment in order to complete its initial start-up phase before hitting the marketplace. One biofuel company in Texas has failed to secure this second set of funding, forcing the firm to file for Chapter 7 bankruptcy.
The company, Terrabon, stated in its filing that it failed to garner additional funding it needed to complete its first commercial-scale plant. Terrabon had initially secured the funding planned for this year, which was supposed to be led by Waste Management. However, Terrabon learned in August that Waste Management would not be able to contribute to the funding round.
In late August, Terrabon laid off 40 members of its staff in order to cut back on expenses, while hoping to buy more time to find funding. Unfortunately, other investors were unable to fill the funding deficit under such short notice. With this revelation the development of the plant was halted, resulting in the firing of approximately 60 full-time employees.
A Chapter 7 bankruptcy, such as the one filed by Terrabon, will allow a business to liquidate its assets to pay debts and eventually obtain a formal discharge of remaining debt under court order. While this type of bankruptcy forces the Texas company to discontinue operations, it allows the possibility for leaders to move on to new business ventures with greater chances of success.
Source: BioFuels Digest, "Advanced biofuels pioneer Terrabon files for chapter 7 bankruptcy: One-off or trend?," Jim Lane, Sept. 10, 2012