Updated: 19th February 2021
If your business has suffered financially because of poor Christmas trading, the culture of business rescue in this country means there’s a framework of support available, even if it’s experiencing serious financial distress.
One of the most important aspects for many businesses in this situation is having fast and easy access to finance, and alternative lenders fulfil this need by providing flexible forms of funding that can be customised to each business.
Other solutions including debt restructuring, formal repayment plans, and protection from creditor action, can also help to save a business from closure. But firstly, what types of alternative finance might be available to help you deal with the after-effects of a Christmas trading slump?
These are just a few types of alternative finance that can help struggling businesses:
Merchant cash advances
A good option for retail businesses, merchant cash advances provide funding based on the value of future card sales. The lender takes an agreed percentage of each card sale, offering valuable flexibility with regard to repayment, especially at times when business is slow.
If your business owns assets of value, you may be able to leverage them to secure the finance you need. Sale and leaseback, for example, enables you to sell an asset and then lease it back from the lender whilst having continuous use of the asset. This type of funding is often used by manufacturers, farming, and agriculture businesses – in other words, by industries where hard assets are fundamental to success.
Factoring and invoice discounting both use the value of the sales ledger to generate regular cash injections. It offers finance that grows with your business, and factoring can also remove the pressure of collecting your own debts as the lender takes over your credit control function.
Company Voluntary Arrangements (CVAs)
Company Voluntary Arrangements are official insolvency solutions whereby a company’s debt is formally restructured by a licensed insolvency practitioner (IP). The IP negotiates with creditors for lower and more affordable repayments, charges and interest are halted, and the company is protected from legal action as long as the repayments are made. A CVA could help you escape serious debt if you’ve experienced a bad Christmas trading period to the extent that your company may be forced into liquidation if you don’t take action.
Time to Pay arrangement (TTP)
If you owe money to HMRC, you may be able to negotiate a repayment plan called a Time to Pay arrangement, or TTP. This typically gives you 6-12 months to repay your tax arrears, but you’ll still need to keep up with your current liabilities. An important consideration when negotiating a TTP is that HMRC will want you to repay as quickly as possible, but you must ensure your business can afford the repayments as they could petition to wind up your company if the arrangement fails.
Entering company administration protects you from creditor legal action by providing an eight-week moratorium period for plans to be formulated. It’s a process that’s typically suited to larger companies, and offers a number of exit routes including sale of the business as a going concern.
If your business is struggling due to a bad Christmas trading period, our experts at Real Business Rescue can help. We’ll assess your current financial position, present your best options, and provide ongoing support to deal with situation. Contact one of our partner-led team to arrange a free same-day consultation – we work from a large network of offices around the UK.
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