Many companies will suffer cash flow problems and seek business recovery at some stage, be that as a result of a bad debt, a lost order or simply a downturn in trade. Many companies will also experience periods when they suffer trading losses, perhaps arising from lower than expected sales, coupled with commitments to existing substantial overheads. If cash flow problems are not addressed early on then intervention will be required in the form of business recovery solutions.
Directors will often be able to steer their company through these challenging periods, returning it to profitability and a secure cash position. When these pressures are applied it can, however, be easy for directors to find they spend more time firefighting simply to continue trading, rather than actually dealing with the problem that has arisen and reaching a solution to their company’s financial problems. In these circumstances, there is a risk that the position will deteriorate further, sufficiently that the company may find itself unable to settle liabilities that are due for payment.
It is at this stage that the directors may seek advice and will most likely be referred to an insolvency practitioner, who typically provides business recovery services, usually involving some form of formal insolvency process.
Depending on the circumstances, it may be determined that one of the following business recovery options is required:
In some circumstances, these will be the right business recovery options for the business; perhaps where there is no desire on the part of the directors to continue trading and an orderly wind-down of the company’s affairs is preferable.
However, these options may seem somewhat heavy-handed in some circumstances, with the outcome being highly undesirable to the business owner. Where the underlying business is viable and there is a commitment to continued trading, cash flow problems should not have to result in the diminution of the value of the business or, worse, in the company ceasing to trade altogether. Business recovery solutions can also focus on alternatives that allow the company to continue to trade and recover from financial distress.
Cashsolv provides a number of alternative solutions to the standard business recovery options available to businesses, designed to enable companies to continue trading, deal with creditor pressure and allow the business owners to concentrate on future profitability. Cashsolv implements a number of tools, depending on the circumstances, to achieve a more favourable outcome for the stakeholders in a business, compared to the more traditional business recovery options.
Company Voluntary Arrangement
A company can focus on business recovery by agreeing a deal with its unsecured creditors to vary the time and or amounts due to them. The deal is binding on all creditors and is typically funded by contributions from future trading over a period of three to five years.
Emergency loan
Where a company requires cash fast, obtaining funding from a bank may not be feasible as they may not be able to react quickly enough, or require extensive cash flow projections and financial information which cannot be prepared in time, or simply be adverse to lending to a company with cash flow issues. A short-term emergency loan may be the business recovery answer.
An emergency business loan can be in a company’s bank account within 24 hours, for an amount between £20-250k. Typically, an emergency loan will only be for a short period of time, whilst the immediate issue is resolved, for example, where payment of a significant debt due to the company that has been delayed and a company has its own financial commitments to meet.
New funding
A short-term emergency loan may not be a viable means of solving a company’s cash flow problems and there may be a need for a longer-term funding requirement to aid business recovery. In these circumstances, Cashsolv can help in getting the right longer-term finance in place through asset based lending by working with a panel of lenders selected based on their willingness to look at the bigger, long-term picture.
Creditor Cashplan
As well as the pressure from creditors being a symptom of cash flow difficulties, it can also exasperate the situation further. Time spent trying to deal with these creditors and working out how they are going to get paid can distract further from actually being able to spend time creating a solution to the cash flow problems and improving your business to ensure that further issues don’t arise.
A Creditor Cashplan gives you the time to address business recovery and can take the pressure of dealing with those creditors away. Cashsolv will act as an intermediary so that directors can focus on running their business, whilst the company pays its older creditors over a 10 month period.
HMRC Time-To-Pay Arrangements
When the creditor to whom you owe money is HMRC, a Time-To-Pay Arrangement (TTP) may the solution. We can help you negotiate a repayment plan of the debt, within the capabilities of your company’s cash flow commitments, whilst also evidencing business recovery to HMRC and that you have the ability to pay future taxes on time.
Debt collection
Cash flow issues problems may arise simply as a result of a business having significant debts owed. A pro-active approach to debt collection will recover overdue debts and aid business recovery in this situation. This can be combined with a review of a company’s credit control process to help avoid a similar problem in the future.
Many businesses leave it too late before they start looking at business recovery options. They wait for business to get better or bury their heads in the problem and refuse to seek help. With Cashsolv’s unique products you can attack the cash flow problems early on, before reaching crisis point.
For a confidential evaluation and advice call or contact our cash flow experts now on 08080 42 42 42.
By Suzy Franklin
| 5th August 2014
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