The word bankruptcy, currently used as a synonym for insolvency, describes a state of financial ruin by an individual, institution, or organization. However, although used interchangeably, they may not actually mean the same thing.
The origin of “bankruptcy” dates back to the 16th century in Venice and Florence, and comes from the Italian banca rotta, meaning “broken bench.” In that era, people who had surplus money — mainly merchants — adopted the custom of lending it in exchange for interest payments. These transactions took place at a bench. The businessman or lender would sit at it and place gold coins on top, so they were visible to everyone. They were usually located in public squares or busy markets. When they ran out of money due to poor management of their resources, the benches were left empty and they could no longer display their wealth. It was considered a disgrace when bankers of that era could not pay all their clients. When this happened, they were required to break their bench in public to announce that they could no longer provide their financial services.
Today the term bankruptcy has evolved into “insolvency,” which over time has come to mean the same thing: when you no longer have income and cannot sustain your business or even your life.
How can I avoid reaching this point in my business?
There is only 1 solution: DO NOT TAKE ON MORE DEBT THAN YOU CAN PAY. Do not exceed the loans that are granted to you, and pay everything on time. This way you can avoid this situation — otherwise you could face repossession of your business and lose far more than you already have.