A business that spends more money than it earns will end up in the red. If a business is in the red and doesn't recover, it might eventually go bankrupt.
The phrase in the red comes from the old accounting practice of using red ink to record debts and expenses on a company's balance sheet. In contrast, accountants used black ink to record income and profits. If the balance at the bottom for an accounting period was "in the black," that was a good thing, showing that the company was profitable, or at least not in debt. But if the balance was in red ink, that showed that the business was not profitable, with more debts than income.