Updated: 21st July 2021
If your business is experiencing financial decline or you’re concerned that it may be approaching insolvency, it’s important to seek advice from a licensed insolvency practitioner (IP) as soon as possible.
Acting quickly provides you with more options and routes out of unmanageable debt should you need to take formal action, and allows you to better understand the processes that might be available.
Real Business Rescue is the UK’s leading independent business recovery specialist, and can help you deal with worrying financial decline.
The health related issues of Covid-19 appear to be slowly coming under more control, but businesses are just beginning to feel the effects following the slow withdrawal of government support schemes.
Repayment of coronavirus business loans, including CBILS and the Bounce Back Loan Scheme, in addition to payment of deferred VAT liabilities and other taxes, are placing extreme pressure on cash flow for businesses already in a precarious financial position.
Additionally, although the moratorium on landlord evictions has been extended to March 2022, this is another pending issue that could significantly affect financial stability for many businesses in the near future.
Although the economy is predicted to recover relatively quickly once we return to a ‘new normal,’ there are no guarantees that social distancing and other trade limiting restrictions for many sectors, won’t be reintroduced.
So what help is available in the UK for businesses in debt, and how can you access it? Get in touch with our partner-led team at Real Business Rescue and we can explain your best options, which may include the following:
HMRC Time to Pay (TTP) arrangement
HMRC run a Time to Pay scheme that can help you avoid penalties for missed tax payments. Accessibility to the scheme was broadened during the pandemic, and you may be able to negotiate a new instalment plan for the tax payments due.
If you deferred your business’ VAT payment in the quarter 20th March 2020 to 30th June 2020, you could also be eligible for a new scheme. The VAT deferral new payment scheme has been introduced to help businesses still struggling to meet their liability for VAT, and may allow you until 31st March 2022 to settle your bill.
Alternative finance options might be available if your business is experiencing a decline. These are typically quicker to access than a bank loan, and the products are more flexible. Invoice finance is just one example of how you can support healthy cash flow now, when insolvency is a threat, but also when the business begins to grow again.
Asset based finance can also be a good option for businesses that own valuable assets. Their sale can generate significant sums that help the business ride out the effects of the pandemic, and set it back on course to profitability.
Company Voluntary Arrangement (CVA)
If your business has declined to the point of insolvency due to the pandemic or other issues, but is viable for the long term, a CVA can help you pay off some of the business debts and trade out of difficulty.
You would need to seek assistance from a licensed insolvency practitioner (IP), who would negotiate an affordable repayment plan for the business. This would also need to provide creditors with a beneficial return.
Company Voluntary Arrangements typically last between two and five years, and are legally binding. They allow you to repay a pre-agreed proportion of your business debts without relentless pressure from creditors.
Company administration offers an immediate reprieve from creditor pressure. The procedure involves an eight-week moratorium period where no legal action can be taken against the business.
Again, a licensed IP takes control of the company and establishes a route out of administration. This might involve reducing your workforce or selling hard assets to generate cash, or even selling the business as a going concern.
A Company Voluntary Arrangement may also be an option if the business is believed to be sufficiently viable to rectify any financial issues with a little time.
Creditors’ Voluntary Liquidation (CVL)
This is a formal liquidation process for businesses that cannot be rescued. When you seek help from our licensed insolvency practitioners, you’ll find that our main aim is business rescue, but there are instances where this is not possible.
In that eventuality, it is beneficial to creditors and the company’s directors to enter Creditors’ Voluntary Liquidation – this process protects you from allegations of wrongful trading, and prioritises your creditors’ interests.
A further benefit is that you may be entitled to director redundancy when you enter CVL, with the current average claim being £9,000. This can help you pay for the process, repay some of the business’ debts, or support your personal finances.
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