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Business loans for insolvent companies


At Cashsolv, we offer emergency business loans to fund short term cash flow problems, providing you with the working capital that you need quickly which will relieve the immediate cash flow pressure. Emergency business loans can be for between £20,000 and £250,000 and payment can be made into your company’s account within 24 hours.

In the life-cycle of almost every business, there will be a time when additional funding from short term business loans are required. This may be part of a long-term strategy of investment in skills or machinery to enable the business to grow, or may be as a result of a large new order being received, and where there is a requirement to purchase a significant quantity of stock. There may, however, be occasions where the need for business finance is generated by a more pressing, immediate need which may ultimately be a matter of survival for the company.

Business loans can be critical to the survival of the company

Imagine that you have based your cash flow projections on a large new order that you fully expect to receive. At the last minute, it becomes apparent that the order is not going to be placed. As a result, you now realise that you are going to have a significant problem with funding the immediate payments that you need to make, which you had anticipated settling with funds from the new order.

Perhaps you are awaiting payment of a significant debt, monies which you anticipated that you would have already received and had earmarked to pay this month’s wages.  Without the possibility of business loans the company does not have sufficient cash with which to pay its wages bill and it is now not anticipated that the funds will be received before pay day. 

In either of these scenarios, the implications could have significant and potentially catastrophic consequences for your business. Those unpaid creditors may start legal action against the company in order to recover their debt, which may, at best, have an adverse effect on the company’s credit rating and, at worst, result in a winding up petition being presented against the company. If staff are not paid, are they likely to remain loyal to the company?

Timing of business loans can be key

If the underlying business is fundamentally sound and it has the ability to repay business loans, only at a later date, then an insolvency procedure would be an unnecessarily harsh, and potentially terminal, way of dealing with the problem. As a director, you might then seek alternative method of short-term funding in order to make the immediate payments and repay the liability when funds are available. The problem that is often encountered in this situation is where to obtain the short term funding from. Traditional methods of applying to a bank may prove difficult as they are unlikely to be able arrange the funding within the timescale in which funds are required.

Emergency business loans criteria

There are, of course, some criteria which would need to be met in order for funding to be provided:

  • Funding will only be provided to a limited company, not to an individual
  • A personal guarantee will be required
  • The business must be fundamentally viable
  • There should be no history of continued losses
  • There must be evidence of a clear ability to repay

If these criteria can be met and business loans are determined to be the appropriate method for dealing with a company’s cash flow problems, it can provide a company with a solution that enables ongoing trading, allows the directors of the company to remain in control and deal quickly and easily with a problem that may otherwise pose a significant risk to a business.

Where an emergency loan may not be suitable for a business, there are other services which may be more appropriate, such as a Creditor Cashplan or a Company Voluntary Arrangement. Like an emergency loan, they are solutions designed to enable viable businesses to continue to trade.

 

For further information Download our Guidance Paper on 'How short term business loans can help your business finance problems', or view the following relevant pages:

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