Debt advice

If your business is struggling, it may be very tempting to invest your own money to try to save it. However, if your business is in financial distress and in need of extra funds, there’s a strong chance your cash will simply be swallowed up and you won’t see it again. Craig Johns at The Insolvency Expert explains further. If your business is registered as a limited company then generally speaking, as a director you’re protected personally if things go wrong. This is because your business is a separate legal entity and investing your own funds personal funds means that if the company fails, you will be treated in exactly the same way as any other investor or creditor. Firstly, you should consider other ways to get cash in to the business quickly. For example, can you sell more stock, chase late payers, offer customers an early payment discount perhaps. If the business is in financial distress then it is unlikely that the bank will be willing to provide new funds or extend your overdraft facility. Examine why the business is failing. Have sales decreased and is there any scope for improving sales by methods such as price cuts. Carefully review all outgoings and consider whether there are any areas where you can cut your costs and save money. A move to cheaper premises may be possible, or could you renegotiate with your existing suppliers for better prices or find alternative suppliers. Letting staff go is always a tough decision to make, but perhaps you could offer reduced hours until sales recover and the business is in a stronger position. Remember that if your business is technically insolvent, that is, where your liabilities are greater than your assets or you can’t pay your debts when they fall due, then continuing to trade and adding to those debts could make you as a director personally liable for the company debts, so be sensible, don’t bury your head in the sand and don’t continue to incur further company debts. If you believe that you are at a point where insolvency is possible, then it is essential that you seek professional advice immediately from an insolvency practitioner in order to protect yourself rather than continuing to trade and making the situation worse. As a director, you have a responsibility to your employees, shareholders and creditors and you have to know when enough is enough and make the decision to cease trading. Our ultimate goal here at The Insolvency Experts is of course to find a means to help your company survive financial distress. Financial distress doesn’t automatically have to signal the end of the road for your company and simply investing your own funds as soon as there is a problem is not advisable unless you have sought the expert advice of an insolvency practitioner. For this reason, contact us immediately you recognise a potential problem.

Contact us

Craig Johns will provide confidential, honest advice and can be contacted on 0300 303 8284 or at enquiries@theinsolvencyexperts.co.uk.