Businesses can run into financial difficulty requiring company rescue for a number of different reasons. Late payments could contribute to a lack of liquidity that makes it impossible to pay debts when they fall due; you might rely too heavily on a single customer that’s recently gone bust, or your business could be growing at such a rate that your cash-flow simply can’t keep up.
All of the above are common causes of company insolvency. They are also examples of problems that can be resolved fairly quickly with the right help. When your business lacks the liquidity to pay its debts, you must act quickly to avoid insolvency. There are a number of options available to help your company recover.
In this article, we’re going to look at 5 company rescue options that could to breathe new life into your struggling business.
1. Use invoice finance to kick-start your cash-flow
You’d be surprised just how many businesses become insolvent despite having good management practice and are viable. Many small businesses simply lack the cash they need to pay their debts when they fall due.
Many smaller businesses feel obliged to offer their larger and more established customers attractive payment terms. These payment terms can be extended to 90 days, to secure a seemingly lucrative contract. A company that offers 90 days to its customers while having to make monthly payments to its own creditors could all too easily find itself in trouble.
But all is not lost. There are a number of alternative sources of finance available to small and medium-sized businesses to help them out of this hole. Invoice finance is one such form of finance that allows businesses to receive an advance against their invoices due, typically 80 to 90 percent. This provides businesses with the instant cash-flow they need to pay their creditors.
2. Propose a company voluntary arrangement (CVA)
A company voluntary arrangement (CVA) is a legally binding agreement between your company and its creditors that allow for the full or part payment of your debts. Any ongoing legal action such as a winding-up petition is stopped. And, once the proposal is accepted, you will be given a long-term structure, typically between one and five years, to repay the debts.
Only viable companies can enter into a CVA with sufficient cash-flow to make the monthly payments can enter into a CVA. If this sounds like a potential solution for you, a company rescue specialist like Company Debt will be able to help.
3. Negotiate a ‘Time to Pay’ arrangement
HMRC is the UK’s most common business creditor, so most insolvent companies will owe money to HMRC in one form or another. HMRC is also the UK’s most prolific issuer of winding-up petitions, so any payments owing to HMRC should be taken extremely seriously.
Jut like any other creditor, it is possible to negotiate with HMRC. One of the most common forms of negotiation resolution is the ‘Time to Pay’ arrangement. This gives businesses the chance to pay their tax liabilities over an agreed period of time, usually three to six months.
HMRC does not give all businesses Time to Pay. Companies should have steady cash-flow, a viable business model and no history of failing to make tax payments in the past. Even then, you should still work with a specialist with experience of negotiating with HMRC to stand the best chance of reaching an agreement.
4. Consider turnaround finance
Turnaround finance, or emergency finance, is a potential solution for insolvent but viable companies. Turnaround finance can provide companies with the short-term cash injection they need to pay their liabilities and get their business back on track.
As well as a viable business plan, investors will also want to see a history of cash-flow and a plan for long-term recovery to give them the confidence the money will be repaid. As with any type of funding, turnaround finance is not free from costs, but it might be the best option available to kick-start your recovery.
5. Enter into a company administration
A company administration is not for everyone, but if you’ve been on the receiving end of a statutory demand you cannot pay, entering into administration can provide valuable protection. An administration can give a company the time it needs to restructure and recover while removing the threat of compulsory liquidation.
During the administration process, a third party insolvency practitioner will take control of the company and try to lead it towards a recovery. This powerful procedure can be extremely effective when used in the right circumstances and result in the financial turnaround of a struggling business.
How can we help?
At Company Debt we pride ourselves on being one of the best debt solution companies in the UK, providing you with reliable and trustworthy company debt help. Our advice is free and completely without obligation, and could be exactly what you need to get your business back on track. Get in touch by emailing [email protected] today or call our directors’ helpline on 08000 746 757.