Updated: 14th April 2020
After taking a risk on a few borrowing decisions a few years back our company has been steadily going into debt with no sign of recovery in sight. We recently had to sell some of our equipment just to pay bills and keep creditors from shutting us down, but now we’re at the end of our rope it seems. Even if we sold all of our assets I don’t think we’d have enough to cover what we owe. At this point we just want to mitigate the damage done and keep ourselves protected from being held personally liable for the debts, although recovery would be nice if possible.
Whilst it seems as though you’ve accepted the possibility of ending the business, there may be some options to consider that will keep you from having to do that. If making repayments is your main issue, a Company Voluntary Arrangement may be the solution. That would essentially arrange new terms on your loan agreements so that monthly payments would be reduced and you’d have longer to pay off each debt.
You mentioned selling some of your equipment to pay bills. A more desirable course of action might have been to use those assets as collateral to obtain approval for a secured loan instead. That way, you’d be given a lump sum of money equal to the value of the asset, but you would have the opportunity to pay it back in monthly instalments instead of having to actually trade the equipment. However, if you defaulted on the loan the equipment could be seized and the monthly payments you made would be lost as well, so it is a trade-off to consider.
Are there any clients that owe you money through invoices? If so you may be able to take out a cash advance against these invoices by using a financial service like invoice factoring or invoice discounting. With these options you could gain access to a line of credit that lets you convert debts owed and future funds into cash now, thereby giving you the capital needed to expand and stay solvent.
At this stage prioritisation and decision-making is paramount, and you’re off to the right start by seeking professional guidance. By participating in a free consultation with one of our turnaround specialists you can learn more about the options your company has. Call us on 0800 644 6080 for more information.