Today’s financial climate is really rocks, so I’m sharing 5 options when facing insolvency. Unfortunately, insolvency is something which can rarely be fixed as it is caused by a series of decisions and events that have caused a company to be on the brink of bankruptcy.

However, with the right understanding of the issue at hand, and with the correct steps taken, many businesses can return to profitability and become hugely successful. With that in mind, read on for more information on options when facing insolvency.

Explore Funding Options When Facing Insolvency

Some companies are actually in a position where they have insufficient capital to grow the business. Having too little or a small amount of debt does sound like a good thing, but it might be the case that you can’t afford to pay creditors, employees or suppliers

If your business is struggling, and only has a small amount of debt, you could borrow cash from the bank to help you out. You may have to take out a personal guarantee, but this is something that should be discussed with your creditors and with the bank too.

Time to pay Arrangements

Most suppliers just want their money back, but don’t want the company to suffer as a result of that. If you can make a good case for it, a lot of suppliers will arrange some form of repayment instalment options. Suppliers know this is far better for them than formal insolvency. It’s one of the most pro-active options when facing insolvency which could buy you time to get your finances in order.

HMRC are generally very supportive if you talk to them early and make it clear that you will keep up to date with your current PAYE and VAT payments. A time to pay arrangement is very useful as it does not affect your credit rating.

Company Voluntary Agreement

A CVA is an agreement which freezes current liabilities, with the option of repaying them monthly over 3-5 years. An insolvency practitioner will oversee the process and guide you on important matters such as what is a reasonable and fair offer to your creditors. To be approved for this, 75% of the creditors must agree.

A CVA is an extremely good way of saving a business, however it’s important to note that it does affect your credit rating and will be registered with Companies House.

Liquidation

Although liquidation sounds scary and business ending, it’s often the best option possible. If the business cannot carry on, liquidation is usually the best and most legally correct option to take.

You can liquidate a company yourself, with the assistance of liquidators who will assist you through the whole process. Once liquidation is complete you can start a new business, however there are few legal matters which must be resolved before doing so. Your Liquidator will discuss the legal formalities with you and explain what you can and can’t do after liquidation.

Administration

A key worry for a company is the threat of a winding up petition from a creditor. Once a winding up petition is advertised, the company’s bank will be completely frozen, which can come as a surprise to directors who believe they have more time than they actually do.

In order to protect yourself from a winding up petition, you can go into administration, which will protect you against any legal battles whilst an exit solution is established. Administration can be an extremely beneficial procedure to save a business, and once an administrator is appointed they will work in the best interest of the business in order to help it recover.

Consult Professionals

If you find your company facing financial difficulties, it’s never too late to talk to insolvency professionals. Remember, the longer the warning signs are ignored, the worse the problem will get over time which could lead to creditors taking action against you. Take action early to avoid such complications.

If these options when facing insolvency have been useful, check out this post on small business finance.