Updated: 2nd September 2020
Coronavirus continues to cause disruption for UK and global businesses, with fractured supply chains and uncertain delivery schedules becoming a common feature. If one or more of your suppliers have gone under, you may be wondering whether you’ll be able to continue trading, but there are steps you can take to improve your situation and provide a financial buffer that allows your business to carry on.
You may be able to find new suppliers that are willing to trade on a cash-on-delivery basis until you become more established as a customer, for example. Operating in this way requires a readily available source of working capital, however, so seeking additional finance is advisable.
Depending on your business type, asset based lending could provide a lump sum of working capital you can use to pay new suppliers, or if your sales ledger is of high value it could be leveraged to provide regular cash sums each month.
Initially, however, you need to claim any goods you’ve already paid for, and ensure their safety if they’re still located on your former supplier’s premises.
If you’ve already paid for goods from your supplier but haven’t received them because the business has gone into liquidation, it’s important to inform the liquidator as soon as possible to prevent them from being sold.
You may also be able to purchase goods you need if you haven’t already, but again this has to be arranged through the liquidator. If you do purchase goods under these circumstances it’s unlikely they’ll come with a guarantee, which might affect your ability to sell to your own customers, or at least to sell them at full price.
Obtaining the items you’ve already paid for or purchasing goods from the liquidated supplier could tide you over in the short-term and help you continue to trade whilst you find a regular new supplier.
If your sales have stalled due to lack of supplies, it’s important to seek professional insolvency advice as soon as possible. You’ll receive reliable independent guidance on the best way forward, and be able to protect your business where necessary.
Here are just a few potential options that could support a continuation of trade under difficult financial and operating circumstances.
Company administration may seem like a drastic move but it provides you with an eight-week moratorium period to make a rescue plan. If you’re eligible, a trading administration could protect you from legal action by your own creditors whilst you regain your footing and boost cash flow.
Restructuring your business’ affairs can provide extra cash to continue trading whilst you source reliable new suppliers. This could include selling non-essential assets, streamlining your processes, cost cutting, or renegotiating unofficially with your creditors. You might also benefit from formally restructuring your business debts within a Company Voluntary Arrangement (CVA).
Company Voluntary Arrangement
A CVA involves formally negotiating with creditors for an affordable single monthly repayment. Whilst a CVA is in place, creditors can’t take any legal action to recover their money and you’re free to find new suppliers and continue trading. This can be a good option for businesses that are fundamentally viable, but experiencing temporary financial difficulty.
If circumstances are such that you cannot continue in trade, Creditors’ Voluntary Liquidation (CVL) allows you to close down your business in an orderly manner without fear of creditors making a claim against you in the future. You may also be eligible for redundancy pay as a director when you undergo this process.
If your suppliers have gone under due to coronavirus, please contact our partner-led team at Real Business Rescue. We offer free same-day consultations and operate a large network of offices throughout the UK.
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