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What options do I have if my business is failing?
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If your business is failing, what help is available for company directors?
- HMRC Time to Pay Arrangement (TTP)
- Alternative Finance
- Informal and formal negotiations with creditors (Company Voluntary Arrangement)
- Company Administration and Pre pack Administration
- Creditors’ Voluntary Liquidation (CVL)
If you believe that your business is failing, it’s important to take action quickly. The first step is to determine whether the company has entered insolvency, as this triggers the requirement for you to cease trading in order to protect your creditors.
Business failure can result from a range of issues, such as the loss of a key customer or an unexpectedly large bill. A general market downturn in this period following Covid has also proved challenging for businesses in many sectors.
So what signs should you look for that might indicate business failure, and what options are there if your business is declining?
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These are just some of the typical warning signs for business failure:
- You cannot secure any further lines of credit or borrowing
- Creditors are relentlessly pressurising you for payment
- You’re finding it difficult to keep up with your business’ liabilities
- Members of staff are leaving
- The business won’t support your regular salary
If you’re experiencing one or more of these issues you may be able to reduce the pressure on business cash flow with the following options.
Is your company insolvent?
If your company is insolvent you have a number of legal responsibilities that you must adhere to. Taking steps to protect creditors from further losses by contacting a licensed insolvency practitioner can help ensure you adhere to these duties.
The team are available now - 0800 644 6080
HMRC operates a Time to Pay scheme that provides eligible businesses with extra time to pay their tax arrears – typically 3-6 months. Although you must keep current tax liabilities up-to-date, repaying your arrears without the pressure of HMRC reminders and penalties is a key benefit.
Even if your bank is unwilling to offer additional business borrowing, you may be able to source an alternative form of funding that helps the business recover. Invoice finance is just one example of a range of alternative forms of finance - flexible, customised funding that’s relatively quick to obtain compared with traditional bank loans. Other forms that might be suitable, depending on your type of business, include merchant cash advances and asset-based lending.
Can’t pay CBILS or Bounce Back Loan?
Don't worry - there are thousands of other company directors in the same position. If you are struggling to keep up with your Covid loan repayments, speak to a member of the Real Business Rescue team to discuss your options. It's Free & Confidential.
The team are available now - 0800 644 6080
A licensed insolvency practitioner (IP) can negotiate with your creditors on an unofficial basis to temporarily lower your monthly payments. This would reduce the pressure on cash flow, and allow the business to recover some financial stability.
A Company Voluntary Arrangement involves formally restructuring your company’s debts, and can be a good option if the business’ decline is temporary. A CVA typically lasts between two and five years, during which time you repay a proportion of the debts, and the remainder is written off.
When creditors are threatening legal action some companies enter a process called administration, which offers an eight-week respite from the threat of winding-up. It allows the appointed administrator to take action, which sometimes results in a CVA, or perhaps a business sale.
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If your company is struggling with unmanageable debts, squeezed cash flow, or an uncertain future, you are far from alone. We speak to company directors just like you every single day, and we are here to give you the help and advice you need.
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If the company meets all the legal requirements to enter pre-pack administration, the underlying business will be sold on. A licensed IP must be able to demonstrate that this process is the best option for creditors.
If the business has failed beyond rescue, your only option will be to enter Creditors’ Voluntary Liquidation (CVL). This results in business closure, but in entering the process you place your creditors’ interests first and fulfil your legal obligations as a director.
Many businesses are finding it challenging to recover during this post-Covid period, so if you believe your business is failing it’s important to seek licensed insolvency assistance as soon as possible.
Real Business Rescue are insolvency specialists. We can offer you a free same-day consultation to quickly establish your options, and we operate an extensive network of offices throughout the UK.
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Still unsure whether liquidation is right for your company? Don't worry, the experts at Real Business Rescue are here to help. Our licensed insolvency practitioners will take the time to understand the problems your company is facing before recommending the best course of action going forward based on your own unique circumstances.
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