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What does business recovery mean

What does business recovery mean? Written by John A Waller, Director. Reviewed November 24th,2022.

When seeking support to assist with a financial crisis with your limited company. To operate a plan of recovery requires the services of a qualified licensed Insolvency Practitioner (IP). 

The primary objective of any IP remains to rescue the ailing business. Once achieved and the business trades profitably, the IP will step aside.

However, many circumstances affect the outcome and strategy to be set. 

Two main headings cover insolvency processes used to aid struggling companies.

  • Business Recovery.
  • Business Rescue.

The ailing company will need to explore then if additional funding may help. The disposal of non-essential company assets to raise working capital. However, directors need to tread carefully.

Insolvency procedures exist to allow such operations. They do however require a licensed Insolvency Practitioner to be appointed. They include:

HBG Advisory offers options to rescue or recover your business.

So, what might these options include?

Renegotiating existing company debt with a Company Rescue

Company Voluntary Arrangement (CVA)

Therefore, a Company Voluntary Arrangement remains used to aid companies encountering a brief difficulty, such as company cash flow problems, and which will revert to trade their way out of potential additional problems, once the current debts remain renegotiated. 

A Company Voluntary Arrangement assists limited companies experiencing financial difficulties. A CVA may therefore: –

  • Write off an unsustainable debt left at the end of the CVA term.
  • Consequentially, all interest and charges then stop.
  • Then company creditors cannot seek additional legal action on you regard any debts incorporated in the agreement. 

What does business recovery mean – Operational Cost Reduction

Planning to reduce non-essential operational costs may avoid your business, then crashing into insolvency. However, if the cost-saving remains viably sustainable, then the saving may revert to paying off debt. 

Non-essential expenses 

  • Software subscriptions (excluding essential licenses for operating systems).
  • Non-essential staff training and development (excluding regulatory ones).
  • Stationery.
  • Networking events. (Checking not to affect new business generation).

Streamlining your business in this way can increase efficiency and provide a blueprint for future profitability. Keeping a close eye on stock levels and ensuring an effective ordering system will also help you generate more cash. 

It is vital when directors trade out of insolvency, that they protect the interest of creditors at all times.

What Does Business Recovery Mean – Sourcing New Funding

Suppose your business needs a cash injection to overcome its current financial issues. Entering into a factoring and invoice discounting agreement is quick to set up. It uses the amount of money in your sales ledger, enabling cash to be released far quicker, boosting therefore cash flow. Cash release upon request of the user once invoices are approved, up to limits set.

Eligible companies can release more cash as their business grows, without a high credit rating or having to complete onerous loan applications. 

Other funding options:

  • Asset-based loans for companies with assets free of finance or with equity.
  • Peer-to-peer lending.

Company administration

Company administration remains a fast protective formal insolvency procedure. It therefore provides companies with a temporary moratorium period, so an IP can evaluate the best course of action for the failing company. Unlike a liquidation, an administration allows a company to trade on potentially. So, understand the difference between a liquidation and administration.

Once the company is in administration. The company’s creditors may however not proceed further with legal action. The then appointed administrator remains required to deliver any or more of three outcomes:

  • Maintaining the company as a profitable going concern.
  • Achieving a more beneficial outcome for the company compared to a liquidation.
  • Selling the company’s property to discharge secured or preferential creditors.

What does Business Recovery Mean – HMRC Time to Pay (TTP)

HMRC allows companies considered viable additional time to settle tax arrears. However, HMRC only authorises this facility, subject to proof that any financial difficulties remain temporary. 

At this point, company directors should contact a licensed insolvency practitioner for support. Dealing with HMRC for a time to pay requires credibility and accuracy. The HMRC will spot requests that may fail early on and decline any TTP.

The maximum you may achieve to repay is twelve months. However, often the term ranges from three to six months.

When rescue is not achievable

It remains the primary goal for your business to recover. However, the truth often pans out; sometimes companies remain beyond rescue. Then, voluntary liquidation looms.

For experienced, commercial and professional recommendations regarding your company’s position financially. Please call John at HBG Advisory, who will be glad to assist with company debt and advice and arrange a ‘free meeting with HBG Advisory‘. We may be contacted by: –

  • Phone: 0330 056 3120 8 am to 8 pm, seven days a week.
  • Arrange a free, confidential meeting online by booking a time and date on our VIRTUAL service, straight from the safety and privacy from your home or place of work.
  • To view our management team, click on The Team at HBG Advisory.
  • HBG Advisory are members of the TMA
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