If you seek advice from an IP, their first objective should always be to rescue your business and return it to profitability, if that is what you want. Depending on the circumstances of your business and the level of debt owed, recovery can be achieved in a number of ways. You have recognised that a problem exists and that your company is in danger of entering insolvency. Recognition is the first step. An IP will help you to fully assess your situation, and direct you towards the best options. Jason Elliott at Insolvency Experts Bolton sets out some of those options:
Renegotiate your existing debt
A Company Voluntary Arrangement (CVA), is a commonly used procedure for companies experiencing a temporary setback, and which are expected to trade their way out of further problems once their existing debts have been renegotiated. A CVA can offer benefits to companies in distress, such as writing off any debt that remains at the end of the term. Further, all interest and charges are stopped, and creditors cannot take further legal action against you in relation to any of the debts included in the CVA.
If your business needs a cash injection to overcome its current financial issues, a range of options are available which may be suitable. Factoring and invoice discounting using the value of your sales ledger to release cash amounts regularly throughout each month is just one option. Eligible companies are able to release more cash as their business grows, without the need for a high credit rating, or having to complete onerous loan applications. Other potential types of funding include asset based finance for companies with assets such as plant and machinery, and peer-to-peer lending using an online platform.
Company administration is a formal route into insolvency that provides a temporary moratorium period during which an IP assesses the best route for the company. Creditors are not allowed to take further legal action during this period, and the administrator must achieve one of three outcomes: • Rescuing the company as a going concern • Achieving a better result for the company than if it was liquidated • Realising company property for the benefit of secured or preferential creditors • Time to Pay (TTP) HMRC offers eligible companies additional time to pay their arrears of tax, if the financial problems are deemed to be temporary. Any company applying for this would need to present a strong case for extra time to pay, backed up by detailed facts and figures. Enlisting the help of an IP when applying for time to pay is advisable as they are accustomed to dealing with HMRC on a day to day basis. HMRC are known to respect the fact that you are taking your financial situation seriously and seeking professional help can work in your favour – up to 12 months extra time to pay may be available, although the term is commonly 3 to 6 months.
Reducing your operating costs may avert the need to enter formal insolvency, and can release a significant amount of money each month to repay debt or gain new business. Non-essential costs could include software subscriptions, staff training and development, stationery, and entertaining. Streamlining your business expenditure in this way can increase efficiency, and provide a pathway to future profitability. Keeping a close eye on stock levels and ensuring there is an effective ordering system can also help you to generate more cash. It is always the hope that business recovery is possible, but the reality is that sometimes companies cannot be rescued. In these cases, liquidation may be the best or only option. To obtain an independent and professional judgement on your company’s financial position contact Insolvency Experts Bolton. We have vast experience across a wide range of industries, and offer no nonsense, honest advice in complete confidence. Jason and his experienced Insolvency Experts Bolton are available now on 0300 303 8284 or via our contact us page.