Options for businesses in financial distress

Debt Advice

Is your business in financial distress? Craig Johns, at The Insolvency Experts gives some advice. We recognise that the last people you would ever want to speak to are an Insolvency Firm, but we also know that trying to understand your options can be equally challenging. Dealing with creditor pressures, penalties for late payment, mounting debts and HMRC liabilities can be hugely stressful and as a company director you may feel as though you are drowning. When a company’s liabilities exceed its assets, legally, it is considered to be insolvent, and at this point the risk of liquidation arises. Rather than burying your head in the sand, to give you the best chance to save your business it is important you act quickly and here are just some possible actions: If you don’t already have it in place, invoice factoring might allow you to raise funding against some of your company’s debts from a third party in order to generate some cash. This is a great option if you have multiple clients who currently owe you money and are bound by contract to pay in the future. You can convert these future payments to cash quickly, and then use the funds to repay existing or overdue debts. You might also be able to obtain a secured loan by using some of the company’s assets as collateral. Although technically this is the equivalent of creating a new debt to repay old debts, it could help the business by alleviating immediate cash flow pressures and preventing any legal action taken against the company. Could you offer customers early payment discounts in order to collect cash quicker, or negotiate longer payment terms with suppliers? Both of these would provide breathing space whist you work on strengthening the business. If you’ve already tried negotiating with creditors, an insolvency practitioner (IP) could help you draft and propose a company voluntary arrangement (CVA). The IP would create a proposal to the company’s creditors based on its affordability. This is usually done on a “full and final” settlement basis. Or by maintaining monthly contributions from profits going forwards, what are paid to an appointed IP. If the creditor feels that the agreement outlined within the proposal is feasible, they may agree to it, at which point they’d no longer be able to petition the court to wind up the company unless the terms of the CVA are breached or new liabilities are created and not paid. If your business is in financial distress and you would like to discuss your options contact our specialist team of insolvency practitioners here at The Insolvency Experts. Our ultimate goal is to help your business survive financial distress and we will provide honest, confidential no-nonsense advice. We can be contacted on 0300 303 8284 or via our enquiries page.