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My Limited Company Is Struggling to Stay in Business.?

My limited company is struggling to stay in business, and freedom day has happened. Yet, the damage over the past eighteen months of pandemic closure has, despite support, decimated my businesses:

  • Cash flow;
  • Market.

Further, Brexit has also impacted me, and I do not have staff to reopen or trade at my previous level.

Additionally, I no longer can pay my bounce back loan.

So my solvency is at risk.

My Limited Company Is Struggling to Stay in Business.? What am I, as a company director, to do?

We no longer have the cash flow to invest further into the business.

However, before the pandemic, our business plan worked. We believe more working capital will help, but I remain sceptical about returning to profit again at the rate we’re accumulating debt. The last eighteen months have impacted our business credit rating. Obtaining standard loans is impossible, so what next?

As directors and owners of your business, you fear closure, even though you believe it can succeed. 

Please read what is company insolvency in the UK.

What assistance is available to directors and companies?

  • Non-traditional finance for your business? 
  • Consider a Company Voluntary Liquidation.
  • Pre-pack administration.
  • Company administration.
  • Company Voluntary Arrangement CVA.

No one business is the same. Indeed, the same applies to any issues a company facing distress incurs.

However, each no-one-size-fits-all solution for a company experiencing financial distress makes sense. A struggling company can be turned around in various ways, particularly if actioned early.

So, consider whether the company is viable? If yes, then several routes exist to allow limited companies to therefore move forward despite financial issues. 

  • Non-traditional finance for your business?

If the primary financial issue with your business is poor cash flow? Then, subject to its foreseeable viability, directors may require an injection of working capital into the company. A limited company with a low credit score often struggles to secure a loan. Nevertheless, directors can consider other options, including:

  • Invoice discounting, and 
  • Invoice factoring.
  • Asset financing; 

It would all enable you to use the company’s physical assets, outstanding invoices, or accounts receivables respectively as collateral to secure funding. Although you would be putting these assets at risk (as lenders could seize them if you do not comply with the loan agreement), it could be the ideal solution if you need extra money to start things.

  • Consider a Company Voluntary Liquidation.

If your company is no longer viable and has no unencumbered assets to use for further funding, the options companies may consider is: 

A CVA, though an insolvency option, provides a legally binding agreement between the company and creditors to pay them monthly over a maximum of 60 months, sometimes at an affordable percentage of the debt outstanding.

A CVA is cash flowed out of projected profits out of viable business while paying its ongoing creditors.

  •  Pre-pack administration

When you wish to buy the business in part or whole minus its debts, consider Pre-pack administration

The company’s assets and business are sold to a new limited company, allowing the business to continue seamlessly trading in the newly formed limited company. Equipment you wish to purchase, along with employees, clients and other chosen purchased assets, will migrate over once the pre-pack completes.

When you and your business face severe creditor pressure, as a responsible director, you should be mindful of the director’s duties and responsibilities, particularly to the company’s creditors. Once creditors threaten your business with a winding-up order, you need to seek help either postponing the order or having it removed. Larger companies with such issues require time to address the issue. 

An Administration may be best suited, as it ring-fences your business legally, allowing time. Often once in place, a limited company may consider the merits of a company’s voluntary arrangement (CVA).

My Limited Company Is Struggling to Stay in Business.? Should rescue be impossible?

Business since the Coronavirus COVID-19 pandemic has run out of steam. The company no longer remains a viable concern and past rescue. The pandemic has had significant changes in how people do business. Many established businesses face ruin, as people’s habits have changed due directly to the pandemic.

Perhaps the previous business model remains no longer reason. Those who are at this point need to consider closing the company down using:

Insolvency that limited companies can only enter under the guidance of a licensed insolvency practitioner. The liquidator will realise that all assets and funds raised minus the liquidation cost to repay creditors in order of priority and remove it from the registrar at Companies House. The company then no longer exists as a legal entity. Therefore, the liquidator shall write off any remaining debts, excluding those guaranteed personally.

Contact HBG Advisory today

A business you may consider no longer viable needs a licensed Insolvency Practitioner to examine it.

Directors fear approaching licensed Insolvency Practitioners as they fear the outcome. However, directors are often surprised at what is available to support the business while ensuring the interest of the creditors is secured. Perhaps directors should consider it a form of insurance?

The team at HBG Advisory offers many options to distressed company directors and their companies.

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Business recovery for distressed directors and limited companies.
Business Struggling Financially
Business Struggling Financially
Business Struggling Financially
Business Struggling Financially