Times are tough and, as economies slow down, businesses do too. For many businesses the slow-down happens too suddenly for them to take action, or their overheads are so high that one or two bad months can ruin what could potentially be a very profitable business endeavour. Companies that are struggling with cash flow have a number of options, and the sooner they realise they need to make major decisions, the more options they have available to them. An online business recovery test will indicate which option suits the company’s needs best.
We have anticipated a problem with our cash flow and want to do something about it now.
Cash flow problems are associated with all kinds of businesses but the good news is that if you have foresight you can tackle this issue before it becomes a big and permanent problem. Factoring allows for debt collection at the end of every month and gives business owners greater control over their finances, especially when pressure is due to unpaid invoices.
Factoring also gives business owners a bit of a heads up in the event that they need to organize extra credit while they wait for outstanding invoices to be settled.
If my company has debts does it mean I have to file for insolvency?
Insolvency is not guaranteed if your debt is manageable and you can keep your company productive and profitable. If your debt is small you could benefit from prepack administration which allows for certain assets to be sold off in order to pay debts. This is ideal for once-off expenses that you may not have anticipated and better suited to smaller debts. If you have a bigger debt then a CVA may be the better alternative.
How can a CVA help?
A CVA places a moratorium on the company and prevents any creditors from filing suits against you, while striking a deal with those creditors to repay the debts that you owe. CVAs are usually calculated over a five year period and worked out into monthly instalments to make the debt more affordable. In order for a CVA to be successful it needs to be approved by 75% of the creditors (or three-quarters of the debt amount). In most cases the creditors are likely to accept the move, and recover some of their money, albeit at a slower rate, as opposed to lose all of it.
Perks of CVAs include indemnity from tax and VAT while the arrangement is in place, and the ability to terminate leases and employment contracts at no cost to your company. A simple online business recovery test is the best way to gauge which option is best for your business.