What Options Are Open To Me?

We can not reiterate too often, the earlier you act the more options you will have. If In Doubt, Find Out! Call ICAN Finance!

Re-Finance

The first option ICAN Finance will always explore is whether it is possible to refinance in order to solve the business' cash flow problems. We have lots of experience in this and have a good track record of success.

However, there are occasions where refinance is possible but insufficient to give the business a fighting chance. In these instances, refinance may still be an option but only in combination with one of the following:-

Voluntary Arrangements (VA’s)

This is an alternative to liquidation for limited companies or bankruptcy for individuals or partnerships. In simple terms, it is an agreement between you / your company and the creditors whereby you agree to pay them some or all of what you owe, over a period of time.

Your proposal will describe what has happened in your business to bring you to this crisis and what will be different next time around. It will also show what creditors would be likely to receive if the business has to close. Faced with this information, the creditors must decide whether they will support your proposal and they will cast their vote accordingly. Each £1 owed equates to a vote and you need to get 75 % of those who bother to vote, in order to have the proposal approved. When approved all creditors, whether they voted or not (as long as they were properly informed) will be legally bound by the agreement.

To undertake a “VA” you need an insolvency practitioner (IP) to put the proposal together to meet all the formal legal requirements. Good IP's will often contact your creditors and discuss the proposal with them to help get their agreement. The business will then obviously need to trade on and you are not out if the woods yet! Most suppliers will continue to supply you but they may do this on more restrictive credit terms or even on a pro-form basis. It is our experience that this is the point at which new additional finance can give the business the best chance of success. We will work closely with the IP and will try to arrange finance to dovetail in with when the VA happens.

Voluntary Liquidation (VL’s)

This is available to Limited Companies where a voluntary arrangement is not possible or where the owners/directors are unwilling to trade the business on.

In such circumstances, it is possible to set up a new company and it may even be possible for ‘newco’ to buy some or all of the assets of ‘oldco’. This, often called a phoenix, can be seen by some as being dodgy but in many cases it is the only practical course of action. More often than not companies facing this painful decision have arrived at this point through a combination of factors that are not under their control. For example, bad debts, lack of bank support, illness, competitor's actions, fire, theft, flood, accident, fraud, loss of contract, strength of currency, loss of foreign orders, delays in installing new machinery / systems, loss of key man, overrun on building costs, overrun on R&D, etc, etc, etc. We have seen all of these first hand!

We would hope always to be in a position to refinance and rescue a business rather than see it fail. If you find yourself facing this prospect you will have a million and one worries – not least how to deal with borrowings personally guaranteed or secured on your home – and you could do with someone who will help you through the process. This will be the last resort but it must be emphasised that the earlier you act the more options will remain open to you.

Administration

Until recently, administrations were the preserve of big companies and often made the news in cases such as football clubs. An Administrator is appointed by the court to get the best deal for all of the creditors and this is usually achieved by the business continuing to trade while a rescue plan or a sale of the business (or its assets) is put into place.

If this route is the best option for your circumstances, once you have applied to court there is a 3 month moratorium preventing any creditors from taking out winding up proceedings against your business. The aim of this is to give the business the best possible chance of riding out the storm and surviving.

The Administrator will be an insolvency practitioner and ICAN Finance will work closely with you and them to provide the new finance for the rescue plan.

Receivership

A “Receiver” is similar to an Administrator but his role is to get the best outcome for the secured creditors – normally the bank! Once very common, these have become quite rare since the Enterprise Act 2002 restricted lender’s ability to appoint.

Bankruptcy

In days gone by the stigma of bankruptcy was huge and all pervasive. It was the social and financial equivalent of being given a bell and told to ring it and chant “unclean, unclean.”

However, thanks to the Enterprise Act 2002, all of that has changed. The act seeks to strike a balance between punishing the dishonest or reckless and recognising that some entrepreneurs may find themselves in this position through honest endeavour. If you fall into the latter category then you would most likely only be declared bankrupt for one year.

Nonetheless, this is unlikely to be anyone’s first choice but at least it is not as onerous as once it was.

Next Step

If in doubt, find out: contact ICAN Finance for a free, independent financial review!