What to Do When You are Worried About Your Business Debt

The credit crunch, which began back in 2007 with the run on Northern Rock, continues to hurt businesses today. SMEs in particular have been badly affected, and in many cases are completely locked out of the credit market, leaving them unable to consolidate existing liabilities or expand in order to boost revenue.

Unfortunately, the inevitable consequence is that company directors all around the country are faced with insolvency and the possibility of liquidation.

How Business Insolvency Advice Could Benefit You

If your company is under pressure and you’re feeling the strain, it might be wise to get help. Advisory services can assist with a variety of challenges faced by struggling companies – whether they’re already insolvent or seeking to avoid becoming so.

Firstly, such advisors can offer help with your existing business plan. Running a small company is a stressful job, and directors are often more focused on exterior factors than the kind of small internal inefficiencies which can add up to affect your bottom line in a bad way.

Business Debt

Third party business insolvency advice is useful in that these professionals are experts who are detached from the company, allowing them to make recommendations without being constrained by preconceived notions or emotional commitment to any aspect of the business.

Secondly, should insolvency appear inevitable, it is worth asking about the possibility of entering into a Company Voluntary Arrangement, or CVA.

The crux of a CVA is that it will allow you to continue running the business as a going concern, with a licensed insolvency practitioner negotiating a new deal with your creditors. Of course, a CVA is in reality a fairly complex legal agreement and so isn’t as simple as this description might make it sound.

Lastly, if you are facing the possibility of a winding up, business insolvency advice services can help you explore the options available as a last resort.

Why Voluntary Liquidation Can be The Right Decision

Directors should avoid, if at all possible, having their businesses subject to a winding up order by the courts. Involuntary liquidation is an expensive and intrusive process. If, however, the company would be viable if not for historic debts and one-off factors such as the collapse of a large deal, it might be possible to liquidate on a voluntary basis and form a phoenix company.

Under such an arrangement, the old company’s assets and good will would be transferred to a new company, run by the same directors and staffed by the same employees. The new company maintains its predecessor’s cash flow and value, whilst being divorced of its debts. In return, creditors are able to write off debt which would have been unrecoverable, and gain a solvent customer for the future.

Here’s to a Brighter Future

The challenges facing smaller businesses today are myriad and tough to overcome. However, with effective insolvency advice, it should be possible to move forward to bigger and better things.

Tom Omar is an insolvency practitioner and blogger. He has over 20 years’ experience in advising entrepreneurs on company debt issues.

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