My business is losing money – what options do I have?

Business is failing since COVID-19 – cash flow and company options 

Despite the economy opening up and businesses operating with fewer restrictions, the ongoing impact of the coronavirus pandemic remains significant. The conclusion of the furlough scheme and other government support is making financial challenges worse for many companies.

Once-prosperous businesses are now struggling financially, and some are even at risk of closing down. If your business is losing money, what can you do? If you think your company is insolvent, it’s important to stop trading and get help from licensed insolvency practitioners (IPs), as there might be other options to explore.

 

HMRC Time to Pay (TTP)

Consider additional funding

I. The Recovery Loan Scheme:

While the initial coronavirus loan schemes have closed, the Recovery Loan Scheme could offer the extra funding your business requires to stay afloat. The scheme is open until 31st December 2021, and businesses of any size can apply if they’ve been affected by coronavirus. You can get funding of up to £10 million through asset finance, invoice finance, bank overdrafts, or term loans.

II. Pay As You Grow:

If you’re finding it hard to keep up with repayments on a Bounce Back Loan, Pay As You Grow can assist by spreading the payments over 10 years instead of six. It also provides extra flexibility with options like interest-only payments and payment holidays. This could ease the strain on your cash flow and help prevent further financial losses for the business.

Perhaps you’ve fallen behind on your tax payments? If that’s the case, HMRC has a scheme that gives you more time to settle your tax arrears if your business is facing short-term cash flow problems.

The Time to Pay arrangement from HMRC usually gives a business 3-6 months to clear arrears, but it’s possible to negotiate for a longer period. This arrangement gives you some relief from HMRC pressure and penalties, helping to steady your cash flow.

 

Company restructuring

You might consider officially rearranging your business debts through a Company Voluntary Arrangement (CVA). This allows you to keep trading while repaying creditors a portion of what you owe over an extended period.

CVAs work well for businesses with predictable cash flows. Their effectiveness relies on long-term viability, so if the insolvency practitioner thinks your financial difficulties are temporary, this could be a helpful solution.

 

Company administration

Company administration could be an option for companies facing severe financial problems, especially if there’s a threat of legal action from creditors. It shields the company from forced liquidation and provides some time to come up with a plan.

There are different possibilities with this approach. Sometimes, companies are sold during administration if the conditions are right for a sale. Others find it helpful to reorganise their assets and/or debts.

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Creditors’ Voluntary Liquidation (CVL)

If your business keeps losing money and there’s no way to save it, Creditors’ Voluntary Liquidation helps you meet your legal duties as the director of an insolvent company.

Your business assets get sold to pay off creditors, and the company closes down. As long as there’s no wrongdoing, you’re free to move on to other ventures. You might also qualify for director redundancy pay and other legal entitlements. Check our page to see if you’re eligible for director redundancy pay.

If your business is in financial trouble, it’s crucial to seek advice from a licensed insolvency practitioner as soon as possible. Delaying this could limit your options and might even make you personally liable if you keep trading while insolvent.

Vanguard Insolvency specialises in insolvency and can provide reliable, independent advice. Please contact our expert team – we offer free, same-day consultations and have offices across the UK.