1) Bank pressure

Banks have recently been accused of exerting undue pressure on corporate clients, particularly those experiencing financial distress as a result of the coronavirus crisis. At a time where you may need access to further funds in order to stabilise your company as it recovers from the unprecedented level of business interruption experienced during the Covid-19 pandemic, having your bank on side could be the key to ensuring the future success of your business.

If you are close to breaching banking covenants, your overdraft is being called in, or the bank are otherwise threatening to reduce your credit facilities, it is vital you take expert advice as soon as possible. We can help facilitate negotiations with your bank, alleviating immediate pressure, while also positioning your company in the best possible way going forwards.

2) Creditor Pressure

Now more than ever, companies are ramping up their collection processes when it comes to recouping outstanding debt. If you miss a payment to a creditor, therefore, you may find pressure is placed upon you to pay almost immediately. This is because while you may be struggling financially, so are many other companies as they seek to balance the books amidst a time of record uncertainty. While this means your creditors will be keen to realise as much outstanding debt as possible, it is also likely that they will be sympathetic to your plight if you are not in a position to pay immediately.

When dealing with increasing creditor pressure, the worst thing you can do is ignore the situation. By being proactive and entering into a full and frank discussion about your position and how much you can realistically afford to pay, you are likely to find your creditors are more open to renegotiating terms.

If creditor pressure has got too much, entering into a formal insolvency procedure such as company administration, not only gives you relief from legal proceedings but also the time and space to formulate a workable plan which can be presented to creditors in the best possible light by an experienced company administration professional.

3) HMRC Pressure

HMRC are by far the most common creditor of businesses within the UK. As a huge organisation, they have strict processes in place to deal with those that fail to meet their tax obligations in full and on time. They have both the time and the resources to actively chase those who owe money, meaning you may experience HMRC pressure much quicker than you would from a trade creditor.

While owing money to HMRC may not be unusual, it is still extremely serious, and it is something you should take steps to rectify. Depending on your level of HMRC debt and the amount you can afford to repay, you may be able to enter into a formal payment plan known as a Time to Pay (TTP) arrangement. As the name suggests, this would give you additional time to repay your tax debts, and so long as you adhere to the plan, no further collection activity will take place.

While a TTP may be useful for many companies, other will require a more comprehensive process to be put in place, particularly if HMRC are just one of a number of creditors. This can be done by way of a Company Voluntary Arrangement (CVA) or by placing the company into voluntary administration.

4) Cash Flow Pressure

Cash flow is at the heart of any successful business. Once this begins to suffer, it can be difficult for the company to recover. Cash flow relies on money coming in matching, or ideally exceeding, the money leaving the business. It is what allows for bills to be covered, salaries to be paid, and supplies to be bought. Without reliable cash flow, business can quickly grind to a halt.

While cash flow problems can arise from a general slowing down in trade, it is often caused by factors outside of your control, namely creditors failing to pay their invoices in full and on-time. This can have disastrous knock-on effects when it comes to you being able to meet your own outgoings.

Depending on the source of your cash flow pressures, there are a range of options to help you get out of the red and back into the black. One of these is by securing a form of funding to help you bridge the gap. If creditors are failing to keep to agreed payment terms, an invoice finance product could be suitable. This would allow you to access a portion of the money locked up in unpaid invoices, immediately freeing up cash flow and allowing for other financial obligations to be met.

5) Landlord Pressure

With many leases running in excess of ten years, it is common for a company to experience some form of financial pressure during this time. For many, their commercial premises are vital to the operations of their business, and losing this could mean having to cease trading altogether.

Therefore, when pressure is exerted from your landlord due to missed or routinely late rental payments, taking swift action to rectify the problem is a must. If informal negotiations have failed, a formal insolvency process such as company administration or a Company Voluntary Arrangement (CVA) may be required.

Such a procedure could allow for your current lease agreement to be negotiated, lowering your monthly repayments either on a temporary or permanent basis. Depending on the structure of your company, you may even be able to terminate the leases of your least profitable premises, allowing more money to be diverted towards the areas of your business which generate the most revenue.

6) Company Debt Refinancing

Debt is not necessarily a bad thing for a business. Borrowing can allow a company to embark on an expansion project, access better machinery and equipment to improve production, or simply give the company a financial buffer in times of uncertainty.

However, in order for borrowing to work in the company’s best interests, it must be financed correctly. As a company grows and changes over time, it is vital that its finance options are also revisited. What may have been an appropriate form of funding at the beginning, may now be costing the company more than it is giving.

We can assess your company’s current credit facilities to ensure these are still working in your favour. By refinancing you could potential obtain the same borrowing at a lower interest rate, improved terms, or with added incentives.

7) Director Liabilities and Protection

If your company is undergoing a period of financial distress, and you are worried the company could be heading towards insolvency, you are strongly advised to seek the advice of a licensed insolvency practitioner as a matter of urgency.

As the director of a limited company, you have certain legal obligations which must be adhered to if you believe it is in danger of becoming – or already is – insolvent. One of these responsibilities is to place the interest of the company’s creditors above those of yourself and other shareholders. This means you should not partake in any activities which may worsen the position of creditors or cause them further losses.

For some, this may mean that you must cease trading immediately, for others, continuing to trade in the short-term may actually be beneficial for creditors. This is an extremely complex area and you are best advised by an insolvency practitioner who will let you know the best way to proceed.

Failure to do this could see you held personally liable for any debts the company accrues from the time you knew it to be insolvent. Being proactive and initiating contact with an insolvency practitioner protects yourself, your company, and also your creditors and demonstrates your desire to place their interests above those of your company.

When a company is experiencing increasing financial pressures coupled with diminishing liquidity, time is of the essence. The sooner a company’s problems are identified and addressed, the sooner a plan can be put in place to halt the decline and guide the company up the curve back to a position of stability.

With a team of over 70 business turnaround and restructuring experts, UK Administrators can provide you with the expert help and advice you need to transform your company’s fortunes. Contact our expert team today for immediate help and advice.