Not every business can survive as it is currently organized. The evaluation is simple. If you downsize appropriately, can this business survive, can it be run profitably downsized to appropriate levels based on current revenues?
If the answer is "no" or as I frequently hear "almost, pretty close, it's a step in the right direction, it's better for certain," then it is time to close the business, liquidate the collateral for the benefit of the bank, and move onto an Offer In Compromise, so you can settle your personal liability and move on with your life.
Being an effective small business leader is not about leading your employees and family into the jaws of self destruction. Everyone who is following you, depending upon you expects more. If the business can not be made to be profitable it must be liquidated in some meaningful way, for everyones best interest, as all you would be doing is kicking the can down the road to do otherwise with constant stress and pain.. Be it selling it as a going concern for less then what is owed or liquidating the assets it must be done.
Yes this admission is a disappointment, but it is not a defeat, in fact it is the best decision you can make, as it allows everyone involved to close the books honorably, recover the most possible and move on, you included. Small business owners never die, they simply recover and live to play again. If you take the cure.
Wasting assets to pursue a business that cannot and will not succeed is a fruitless waste of resources and time and serves no viable purpose. Unfortunately, many entrepreneurs are so skilled at surviving, juggling revenue, handling payables, bobbing and weaving, that they can kick the inevitable can down the road for a very long time...losing more and gaining little.
If it don't work...kill it.
You can implement an Offer in Compromise submission that supports a payoff of your personal guaranty for pennies on the dollar without bankruptcy, so you can afford the losses and move on. In fact in most cases especially with an SBA guaranteed loan, the payoff can be paid over time with no interest.
Yes, there is life and options other then bankruptcy after defaulted debt.