According to the latest Red Flag Alert research for Q2 2020, seven consecutive quarters of increased financial impairment has been recorded. This results in them a record of 527,000 businesses in significant financial distress by the end of June 2020. The financial distress has shown to rise much higher and the court activity has not reduced due to Coronavirus pandemic. The pandemic has, in fact, reduced the number of Country Court Judgments and winding up petitions that are taken against the indebted companies.
The significant distress is majorly for those businesses with minor CCJs claiming for debt repayments of less than £5,000, or for those who have been identified by the credit risk scoring system. The credit risk scoring system considers the financial ratios and indicators which includes the working capital, contingent liabilities, net worth, and retained profits.
Creditor pressure and late payment penalties also could be very stressful for the businesses and depending on the severity, the options for the company to stay away from insolvency could be few. The realistic prospect of recovery and action would be taken quicker than we realize. The three major business recovery options are –
Funding And Cash Advances
Invoice financing is one of the best ways. When the company or individual can increase the cash flow by raising a lump sum of capital as quickly as possible for reinvesting it into the business and supporting the ongoing trading – use the invoice financing. Raise the funding through the flexible loan secured against the unpaid invoices and company assets. An invoice finance provider can advance you up to 95% of the value of the unpaid invoice or company asset. When the client settles the invoice, the provider can collect the balance from you that includes a small fee. If the financial invoice is carefully managed, it can help you with the best cash flow and even halt the pending legal action against you. Another way to boost your business cash flow is to find a private lender who can give you a business loan.
Company Voluntary Arrangement (CVA)
A company voluntary arrangement allows the company to agree with creditors on how debt would be repaid. It creditor may provide the option for partial or full repayment, depending on the company’s status for repayment. The equivalent process for the sole trader is termed as the Individual Voluntary Arrangement (IVA). Contact 4R Business Recovery for more details in CVA and IVA, and get the best advice on how to reduce your debt burden.
Company Restart
Company Restart is the step which involves the process of starting afresh without the debt when the company fails for the fundraising or CVA, the next step to do right is the company restart. It is the procedure where the existing company is closed, and during the process, the directors purchase the assets to be traded on in a new company. Company restart is as a resort as the original company closes and the assets, employees, and clients can be retained for the new business.
Contact 4R Business Recovery to discuss your financial distress and the business recovery options that best suits you. We are here to help you to solve your problem, just the way you need 4R Business Recovery to provide you with the best business restructuring and reducing the debt burden, extending the payment terms for up to 5 years.