What route can I take to rescue my struggling business?

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Guest post by Keith Tully

By cutting the cycle of deterioration in its track, you can slow down mounting debts from biting into your cashflow, fine-tune credit control measures and restructure your business through a prescribed company rescue method.

Failing to observe the health of the business and track any downward trends could lead to a fast decline, however, spotting early signs of financial distress can help flip the fortunes of your business, pushing it to a position of strength.

By enforcing a fast-acting strategy, you can slow down the accumulation of debt, replenish capital and prepare your business for further lags in trading during the coronavirus pandemic. Your business may be experiencing temporary financial distress due to trading restrictions and social distancing measures enforced as a result of Covid-19.

As the virus retakes hold on the economy, pushing companies of all sizes into decline, the key to survival is creating a stronghold with emergency cash reserves and reaffirming your relationship with customers during this unprecedented period of uncertainty to gain custom.

We run through a series of support measures which can rejuvenate your business, strengthen your prospects and help you weather testing trading conditions.

Boost business cash flow with commercial finance

If your business is solvent, but aware of the financial pressure which could hit your door during Covid-19, you may be well placed to access alternative finance to boost company cash flow, help further fulfil customer orders, invest in stock and keep the doors indefinitely open during the coronavirus pandemic.

There are multiple types of funding solutions designed to finance different business needs, helping you spur business growth without being restricted by cash flow.

Invoice finance – Invoice factoring and discounting are two types of invoice finance options separated by a subtle distinction.

Invoice finance gives you advance access to funds tied up in customer invoices, helping you reinvest in your business and trade at a faster rate as the speed of incoming payments will no longer control your financial ability, helping you achieve your true potential.

Asset finance – There are different types of asset finance which can help you fund the development of your business and invest in industry resources at a faster pace. Funding the purchase of necessary assets, machinery and equipment through asset finance allows you to spread costs into affordable instalments, helping your business grow.

Crowdfunding – Finance acquired from crowdfunding consists of contributions/donations from an unlimited number of individuals and business investors captured by your business development proposal. Crowdfunding is typically split into four types; reward, debt, equity and donation, all of which consist of a different return for investors.

Angel investing – Angel investment is finance provided by high-net-worth business minds in return for a stake in your business and typically offering mentorship.

Business bank loan – This is a traditional loan from a banking facility designed for businesses, offering greater access to funds and repayment flexibility.

Emergency coronavirus government support

In response to the ongoing coronavirus pandemic, there are multiple finance support schemes for viable businesses experiencing financial struggle as a result of the unstable economic climate. This consists of the Coronavirus Job Retention Scheme, better known as the furlough scheme, and now replaced by the Job Support Scheme as part of the Winter Economy Plan.

The Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme (BBLS) were both established in response to Covid-19.

Negotiating tax repayments with HMRC

A Time to Pay (TTP) arrangement is an agreement made with HMRC to restructure your tax liabilities into affordable instalments, giving you the necessary breathing space to continue trading without impending threats from HMRC. Following the coronavirus pandemic, HMRC has widened the doors to businesses applying for a TTP, however, for HMRC to agree to your proposal, you should be able to realistically make repayments.

Company Voluntary Arrangement

A Company Voluntary Arrangement (CVA) is a formal insolvency procedure for businesses on the brink of insolvency, providing the necessary opening to renegotiate with creditors to restructure debts into a payment plan. If the business can flourish and return to a position of health with this arrangement in place, creditors are likely to agree as it reassures them of repayment.

If the business becomes insolvent and enters liquidation, the likelihood of recouping returns may be slim as there is a strict and legally established hierarchy of creditors which should be repaid in a specified order during the liquidation process. The further down a creditor is in the pecking order, the smaller the chance is of receiving a full/partial payment.

The route you take will solely be determined by the level of support your business needs to continue trading successfully and reach a position of strong financial health. The extremity of your circumstances, business viability and ability to repay creditors will be the core determining factors, narrowing the options available to you.

As we continue forward during these unprecedented times, businesses hit by the financial impact of Covid-19 are recovering, returning stronger, more resilient and adapting to the change in consumer behaviour.

Keith Tully is a partner at Real Business Rescue, a firm of licensed insolvency practitioners and business rescue experts providing insolvency and restructuring services to company directors in financial distress.