The most important thing is not to bury your head in the sand but to address these problems head on.
There has been lots of help available for struggling businesses hit by the pandemic. Covid finance has been available to assist companies and businesses that have been struggling due to Covid 19.
This help has now largely ended but if you are somebody that has taken out Covid recovery finance and your company has gone into Liquidation, you may have concerns, and these are addressed in articles elsewhere on this website.
The pandemic put incredible stress on British businesses (as well as across the world) causing many to struggle. The Covid finance packages were generous and substantial, but at the end of the day, they only went so far and were only available for so long.
At Oliver Elliot, we can help support you and your business. We have helped many businesses that have obtained Covid finance, such as Bounce Back Loans, and are well positioned to explore your options going forward so that you can address them with confidence and make a fresh start.
Common Signs Of Businesses Struggling
Common signs of businesses struggling will be:
- cash flow problems
- refusal of a bank or other finance houses to provide credit
- being paid late by your customers
- avoidance of taking regular salaries and/or dividends in respect of remuneration
- constant changes of staff
- inability to pay your debts when they fall due
- constant firefighting to address problems
- County Court Judgments
- suppliers issuing legal proceedings against the Company looking to enforce debts
How To Seek Help If Your Company Or Business Is Struggling
The DIY Strategy
Whilst in some instances it may be necessary for a business director or company owner to approach their struggles via a DIY strategy, it is still a good idea to seek independent expert financial advice before acting. This will help to ensure that whatever strategy is used is in the business’s best interest and keeps it on the straight and narrow.
Nevertheless, once advice has been taken, it might be possible to consider undertaking that strategy yourself by rooting out unnecessary costs and focusing on the core areas of profitability of the business to ensure that any wastage is removed.
In the case of companies, directors could obtain loans that might be used to free up the Company’s cash flow. As this is a personal loan it is important to consider matters carefully before jumping in. It is critical to ensure you have a profitable core business that you consider can be profitable before taking out further finance.
You may be able to approach certain key suppliers and obtain some forbearance, such as obtaining rent concessions from your landlord.
It is important, however, that in relation to any arrangements with suppliers they are done by consent and that creditors are not stretched, being unaware of why payment is late. Defaulting on debts by stretching creditors without their consent can give rise to a situation to avoid i.e. that of wrongful trading by being unable to pay your debts when they fall due and continuing to trade causing extra losses to creditors.
Obtaining Advice From Charities And Other Organisations Offering Free Advice
There are organisations that will offer free advice for struggling companies and businesses, such as the Business Advice Centre and the Federation of Small Businesses. A list of finance and support organisations for your business can be found at www.gov.uk/business-finance-support.
Obtaining New Forms Of Finance
Finance houses, such as banks for example, can be a source of advice, as well as further finance, depending on your circumstances. For any struggling business or company, if there is a profitable core business then it is perfectly possible to present a business plan to a lender showing how cash flow issues can be met to enable the struggling business to continue and avoid insolvency.
Asset finance can be used such as invoice discounting and invoice factoring to free up cash more quickly from a business’ book debts.
This is a form of finance that enables you to obtain cash against your invoices quickly. Unpaid invoices are typically advanced immediately by way of an 80-85% loan to the business and the balance will be forthcoming (subject to fees) upon payment by the business’ customer.
Invoice Factoring is effectively a situation where a finance company will take over the Company’s sales ledger and collect in its sales invoices. This will typically be on the basis of issuing finance for 80% of an invoice and then deducting 20% in relation to fees for the finance service being provided.
Talking To An Insolvency Practitioner
If, however, your business has come to the end of its profitable life and struggling, you may need to speak to an Insolvency Practitioner or turnaround expert.
In such an instance, insolvency proceedings will ensure that the business addresses the cash flow issues, using the various legal options available to ensure that the creditors’ interests are looked after and that everything is done strictly by the book.
Insolvency proceedings can involve:
Closing A Business Struggling
In the event that a struggling business cannot continue to trade, then at Oliver Elliot, we will be in a position to help you close down the business. As our CEO, Elliot Green, is a Licensed Insolvency Practitioner, he will be able to explore all of your insolvency options so that your struggles can be properly addressed. We are fully licensed to enable you to consider placing the company into Creditors Voluntary Liquidation if it is right for the circumstances. This may enable you to make a fresh start. Contact us for a quote and free initial confidential advice.