My-business-is-making-a-loss-What-are-my-options

Common warning signs that your company is losing income

If your business is losing money, watch out for signs common to all unprofitable companies. These include ineffective budgeting, insufficient marketing, and mounting business debts. 

Spotting these signals early allows you to implement a recovery strategy to boost earnings and avoid your company facing insolvency.

 

What should I do if my business is making a loss?

If your business has faced a financial downturn and is incurring losses, it’s crucial to act swiftly to minimise harm and avert formal insolvency. 

Even if insolvency is unavoidable, there are various options, including formally discussing a manageable repayment arrangement with creditors.

Being in debt to HMRC can be quite a stressful situation. The reality is that they assist certain companies grappling with tax and National Insurance obligations through their Time to Pay arrangement.

 

HMRC Time to Pay arrangement (TTP): Guidelines and considerations!

An HMRC Time to Pay arrangement, also known as a TTP, enables you to spread agreed-upon payments over an extended period, usually around six months. In specific situations, a more extended period, possibly up to 12 months, can be arranged.

You must discuss an instalment plan with HMRC and make a compelling case for them to approve this additional time. Clearly show your capability and dedication to repaying the owed money.

You are still required to pay current and forthcoming tax liabilities in full, as a Time to Pay arrangement typically addresses only overdue payments. It’s important to mention that HMRC considers your past payment history when deciding to approve a TTP.

It’s important to note that not sticking to the agreed terms at any point during a TTP is likely to prompt HMRC to take swift legal action against the company.

 

Should I go with an alternative finance option?

Regardless of whether your financial downturn has resulted in formal insolvency, securing suitable alternative funding can promptly assist you in handling the situation and overcoming debt. 

One key advantage of alternative funding is its greater flexibility compared to traditional bank loans, offering you the possibility to find finance that aligns better with your business needs.

Invoice finance is a notable option – it provides consistent working capital throughout the month, linked to the value of your sales ledger. This not only enhances cash flow but also allows a factoring company to handle your credit control, enabling you to concentrate more on revenue-generating tasks and guide your business away from debt.

But if your company has already gone into insolvency, are there still many available options?

 

1. Company Voluntary Arrangement (CVA)

A Company Voluntary Arrangement, or CVA, includes a licensed Insolvency Practitioner negotiating with creditors for reduced repayments over an extended period. 

This legally binding arrangement shields your business from legal actions by creditors, as long as you meet the specified terms and conditions. It offers the necessary room for your business to recuperate by trading its way out of difficulty.

Directors gain significant control of the company once the Insolvency Practitioner has established the CVA. This underscores the belief by experts that, despite financial challenges, the business is fundamentally viable.

 

2. Company administration

Company administration is another formal insolvency solution providing a ‘breathing space.’ 

When your company enters administration, an eight-week moratorium begins, allowing the appointed administrator to evaluate the business and devise an appropriate plan.

Exiting company administration can take various forms, ranging from entering the previously mentioned Company Voluntary Arrangement to opting for a pre-pack administration route, facilitating the acquisition of essential business assets.

 

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3. Pre-pack administration

Pre-pack administration is a process where core business assets are sold. Employees are transferred to the new company, or ‘newco,’ utilising TUPE – Transfer of Undertakings (Protection of Employment) legislation.

The key aspects of pre-pack administration include the rapid sale of the business and the option for current directors to purchase these core assets if they possess the personal funds to do so.

While it can be a contentious method of business acquisition, there are strict regulations governing pre-pack administration. A licensed Insolvency Practitioner must demonstrate that it yields the highest returns for creditors, for instance.

For more details on enhancing a loss-making business and addressing financial decline, contact one of the Vanguard Insolvency team members. 

With extensive experience aiding businesses across all industries, we provide a complimentary same-day consultation. Our services extend through nationwide UK offices.

Senior Partner at Vanguard Insolvency Practitioners | Website | + posts

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.