Insolvency and company debt needn’t spell the end of a company. With the right advice and direction, you can get your company out of debt and allow it to continue without closing. Since it has the potential to negatively affect your company, employees, and, in the worst case, you personally, it’s important to take the right advice from a reputable, regulated source and separate it from poor advice that could harm your company and lead to bigger problems if badly implemented.
Who should I talk to if my company is in debt?
As soon as you become aware that your company has debts it can’t repay, take advice from a licensed insolvency practitioner. They’re regulated by formal regulatory bodies, so by speaking to one, you’re guaranteed to receive advice tailored to your company’s situation.
Other, unlicensed advisers may claim to offer faster or cheaper solutions than regulated IPs can provide, but be aware that this comes with additional risks; the quality of the work carried out may be inferior to what you’d receive from a licensed IP, extra unadvertised costs may be added to your bill, and you may even face future liabilities depending on the process.
Explore commercial finance options
If your company has an upcoming bill or an unexpected expense that it doesn’t have the funds to cover, commercial finance could be an option to mitigate that expense and keep its cash flow positive while it waits for an incoming payment.
Depending on what works best for your company, invoice finance, invoice factoring, asset finance, and invoice discounting could all be viable.
While commercial finance can help bridge gaps between payments, it shouldn’t be used as an alternative to a formal insolvency process if that’s what the company needs to alleviate its issues.
Repaying in affordable, monthly instalments
One of the most popular methods of relieving your company’s unsecured debts is to repay them in affordable instalments over a set period. A Company Voluntary Arrangement (CVA) could allow this if your company has a viable business model which could be profitable, and its main issue is its unaffordable debts.
This arrangement’s popularity stems from it allowing the insolvent company to continue trading for its duration, which maintains relationships with clients and suppliers and retains its place in the market. However, if the problems are more fundamental, then further, more substantial action may be required to alleviate them.
Restructuring the company back to a profitable state
Administration can be the best option for your company if it requires changes at a more fundamental level. It puts the company into a moratorium-backed state of protection, allowing breathing space for the insolvency practitioner to make the changes necessary to return the company to a profitable state, or at least more appealing to potential buyers. Administration, importantly, is a temporary state, often followed by another insolvency process. The nature of that process depends on the company’s situation.
Closing the company through an insolvent liquidation
While it can sound like the worst option, closing the company can be the best solution if creditor pressure is so burdensome, or if the company’s liabilities are so substantial that there’s little chance of saving it. The insolvency practitioner will suggest that the company enter an insolvent Creditors Voluntary Liquidation (CVL), suspending all creditor action, formally closing the company, and ending all trading, with any assets realised. Once the company is closed, you can move on and start afresh if you acted in the company’s best interests leading up to and during its insolvency.
Voluntarily liquidating the company is preferable to creditors forcing it to close through compulsory liquidation, which gives you less control over the process.
To summarise
If you want to get your company out of debt, as soon as you find out that it has liabilities that it cannot repay, you should take advice from a licensed and regulated insolvency practitioner. They will assess your company’s situation and, after considering all its factors, advise you on the best way forward. Depending on its situation, that may involve commercial finance, repaying in affordable instalments, restructuring the company, or closing it voluntarily.