The Undercapitalisation of Businesses

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It continues to surprise us how many businesses are undercapitalised. During a recent conversation with an accountant, we got onto the subject of clients that were struggling to grow due to the under capitalisation of their business. Following this meeting, we researched the number of North West businesses making under £1m turnover that fell into this bracket. We were staggered with the number of businesses that were not just under capitalised, but by the number of firms with negative working capital. Granted, a portion of these will be undercapitalised for other reasons involving structure/ taxation, but looking in more detail at these firms it was clear many firms could potentially be more successful if they had the capital to work with. I then spoke with a few of these firms, to understand their issues, and to discuss their business and funding. Many of them considered themselves “not the right type of business”.

Flexibility advice from The Insolvency Experts

Historically, the main sources of finance have related to the traditional Invoice discounting or factoring agreements which generally came with lengthy-term of contract and significant charges being levied. However, we now live in a business world where there are so many bespoke products available for companies that need working capital. The traditional invoice discounting/ factoring still exists, but providers are now more flexible on both term and rates. Additionally, there are now many more bespoke products such as single invoice, spot finance, trade finance, stock finance, asset-based lending and property finance. These products can be utilised at the same time by different lenders if required and in situations where the company is purely struggling for cashflow (rather than insolvency) these type of products can ensure that the business retains enough cash to help it to grow. Whilst we limited this exercise purely to clients of one of our accountant contacts, it became apparent this is a nationwide problem. Many of your clients will be looking to grow, but struggling to raise finance in a method that suits their needs and potentially still believe they’re “not the right type of business”, or “don’t fit the mould.”

Tailoring our services to suit you

At Insolvency Experts we are committed to finding clients the best options and rates to suit their needs and we have a panel of providers that we can call on depending upon the situation. There is no charge for this service and we are completely independent with no ties to any lenders. If you have a client that may be struggling for working capital we would be delighted to review their existing funding/ requirements, hopefully helping them finance their next project.

Contact The Insolvency Experts

We understand how stressful it can be to face financial difficulties, so our team of experts are on hand to provide you with knowledge and support. To receive professional business debt advice from one of the Insolvency Practitioners at The Insolvency Experts today, please get in touch. Contact us online or speak to us directly by calling us on 0300 303 8284.