Business Refinancing used to prevent Company Bankruptcy (Liquidation) During an economic downturn, many companies find themselves at risk of failure because they do not have enough cash to maintain their day to day business activities. High Street banks are currently extremely reluctant to lend because of their huge bad debt risks. In the face of this there are alternative funding options which should be considered which are collectively known as business re-financing.
During an economic downturn, many companies find themselves at risk of failure because they are struggling with cash flow to maintain their day to day business activities. This may be the case even if there is a strong order book as customers fail to pay invoices on time as they in turn are trying to preserve cash. There is also the increased risk that the customers themselves may stop trading leaving outstanding invoices unpaid.
Unfortunately, one of the reasons for the current recession in the UK is the lack of available funding through traditional routes such as bank loans and commercial mortgages. High Street banking institutions are currently extremely reluctant to lend because of the huge bad debt risks they have exposed themselves to over the past 5-10 years. Faced with this situation, it is not surprising that many businesses are running out of cash and considering bankruptcy and liquidation.
Where a company requires additional working capital (cash) but is not being supported by traditional banking services, there are other funding options which should be considered, these are collectively known as business re-financing. The most significant of these are as follows:
Raising finance secured on the value physical assets owned by the business such as plant or machinery.
Raising finance on the strength of invoices already raised for work carried out. Money is paid up front by the financing company and then collected over time when invoices are paid.
Finance provided to enable a company to fulfil a confirmed order. The finance company will typically pay suppliers directly and in turn invoice the end customer. Once the customer has paid, adhering to the typical payment terms, the finance company releases any profits back to the business.
Naturally there are certain elements of the business refinancing process that are similar to a standard loan in that there will need to be personal guarantees by the directors / owners. However, the business refinance loan will be based on the availability of real company assets or actual invoices or orders thus reducing the risk of the loan not being paid and guarantees being called into play.
All possible options are worth pursuing if the company is facing bankruptcy or liquidation due to poor cash flow. Business refinancing may not be suitable for all businesses. Nevertheless, where suitable, it can certainly provide a viable alternative to traditional sources of finance such as bank loans and commercial mortgages.
What happens to the directors if a company is wound up?
Once a company is being wound up a Liquidator will be appointed. The liquidator will undertake an investigation into the conduct of the directors to see whether they have knowingly allowed the business to trade while insolvent thus making the creditor's position worse. If this is the case, a director may face being disqualified and held personally liable for the company's debts. As a Director we look at the options you have.
What will having a County Court Judgement do to my company
If a county court judgement remains unpaid, this could lead to more serious action being taken against the business. We look at the impact and what you can do.
Company debt restructure to improve cash flow
Ensuring that enough cash is available to maintain their business must be a priority for companies. Those that do it well will survive. Those that do not are likely to fall. As such identifying problems and implement solutions which may require a radical restructuring of debt must be a priority. We discuss some of the solutions available.
