I can’t afford to pay my suppliers
Few businesses can say they’ve never experienced cash flow problems. Late payment from a debtor, technical issues which grind business to a halt, client cancellations or a sudden unforeseen drop in demand can cause problems. Most companies have temporarily experienced these or something similar. If, however, cash flow troubles have been recurring for you and you’ve suddenly found yourself unable to pay your suppliers, you might be seeing final demand letters through your letterbox. Keep in mind at this point that it is better that you take action yourself rather than a supplier taking action against you.
What options should I consider?
In times of difficulties such as an incapacity to pay suppliers, you should contact us to establish whether your business is viable, or whether tough decisions need to be made to put debt to bed and ensure your actions aren’t brought into question. We can help you every step of the way no matter what path you choose to go down.
Financing through the storm
One of the first options to consider is commercial financing. The type of financing you use will depend on the type and structure of your business. One of our friendly advisors can provide guidance on whether your company would benefit from any of the options listed, and get you the best quote among the top providers, all completely free of charge.
Formal payment arrangements (CVAs)
If your company has the prospect of returning to profit, a Company Voluntary Arrangement (CVA) may be the best route for you to take. It involves consolidating your unsecured business debt into one monthly payment which is affordable and allows the company to stabilise itself. It usually lasts for 60 months and is often a better return for creditors than a compulsory liquidation.
More information about Company Voluntary Arrangements
Terminating the business (CVL)
If it is unlikely that the company would recover, or if you would like to wash your hands of the company, a Creditors Voluntary Liquidation (CVL) may be more suitable. It involves the liquidation of the company’s assets to pay creditors and closing the doors of the company for good. There may be an opportunity to purchase assets from the liquidator, at market value, if you have ambitions to continue running the business in the name of a new company.
More information about Creditors Voluntary Liquidation
Selling on (pre-pack)
A pre-pack administration would be the ideal procedure if you wished to buy back the business and assets and continue trading. It is used when a business model is workable, but the company itself is in too much debt to continue trading. The sale is generally agreed in advance of the appointment of administrators in conjunction with agents’ advice on the best way to market the assets, and if appropriate, the sale takes place immediately upon appointment. This allows a seamless transfer of the business, usually but not always, to the same management team and owners. A phoenix company can rise in its place, preserving jobs, giving a better return to creditors and giving directors a fresh start. With our guidance, you can effectively purchase back your business and make a success of it the second time around.
Should I stop trading?
If your debts outweigh your assets and you don’t have the resources to pay suppliers, you are insolvent, and we strongly advise that you contact us immediately.
More information about company closure
It is in your best interests that you cease to trade so that you don’t run the risk of committing the civil offence of wrongful trading, or more seriously, the criminal offence of fraudulent trading. Both are offences under the Insolvency Act 1986 and the Companies Act 2006. Here’s what else you need to know about them:
Wrongful trading
Directors have a duty to be aware of their company’s financial situation at all times. Therefore, they are obligated to inform shareholders if and when insolvency occurs and to seek help from an insolvency practitioner like Wilson Field. Creditors should also be notified and an attempt to make alternative payment arrangements be made. Continuing to trade will be seen as worsening your creditor’s position further and is considered wrongful trading. Associated with a judgment of this is a potential disqualification for up to 15 years, along with other penalties and financial fines.
Read more about wrongful trading
Fraudulent trading
Fraudulent trading means that a director is considered to have deliberately acted to avoid paying company liabilities. Such an allegation can lead to a prison sentence alongside director disqualification and fines. Selling off company assets prior to liquidation or taking credit, knowing it cannot be repaid are fraudulent actions and have serious consequences.
Read more about fraudulent trading
In summary
If you cannot afford to pay suppliers, there are financial solutions available to help your business out of trouble. However, it is only worth putting more money into the company if it can genuinely continue to trade once creditor pressure has been relieved. There are formal payment plans available, but once again, these should only be put into practice if the company has a viable chance of success. The alternative would be to liquidate the company. If you continue to trade, with the knowledge that you cannot pay your suppliers, it could be classed as trading while insolvent, or fraudulent trading.
How we can help
If you’re worried about being able to pay your supplier or are unsure about the best ways to move your company forward, it’s important to get in touch as soon as possible. Depending on your company circumstances, we can help you find the best route forward and work on what will suit your business best, whether it is through finance, or closing the company. We operate nationwide and offer a free face-to-face consultation.
Insolvency solutions
Experiencing an insolvent period can be a stressful time for anyone. While the issue may be short-term, it can be indicative of more significant problems at a deeper level. If you’re concerned about business debt putting you into insolvency, we can offer a range of solutions tailored to fit your circumstances.
Help for limited companies
Depending on the level of debt in the company, it may be possible to continue trading while you pay back what you owe. Whether this is possible can largely depend on whether the core business could be viable without the debt. A Company Voluntary Arrangement allows you to repay your creditors in monthly instalments tailored to what you can afford, all while staying in control of the business. Other solutions are available if your debt is to HMRC, or if the company requires more restructuring through a third-party to stay operational.
More recovery options for limited companies
Case Studies
Crane Hire Business
Kelly Burton • Construction & Engineering • Pre-Pack Administration
The directors of a previously profitable crane hire business approached Wilson Field for advice following a significant downturn in turnover. The drop-off was caused by the nationwide lockdowns following the outbreak of Covid-19.
The business relied upon several large UK-based housebuilders for their income, who were also negatively impacted by the government restrictions.
The Directors attempted to restructure the business to minimise overheads. However, a winding-up petition was issued during this time, and with no funds available to pay the debt due, the Directors approached Wilson Field to explore the option of a pre-packaged administration.
After an extensive marketing period, a sale of the business and assets was achieved to an associated company, and saved all the jobs at the business.
Director and insolvency practitioner Kelly Burton said:
“The business was severely impacted when the country went into lockdown as lots of regular clients, were themselves unable to work and generate income. However, after working with the directors, we arranged a pre-pack administration, which saw the business and assets purchased, with all of the company’s employees keeping their jobs.”
High End Fashion Retailer
Kelly Burton • Retail • Pre-Pack Administration
A high-end independent fashion retailer, operating from a well-established location found itself experiencing severe financial difficulties, following the closure of all retail stores during the two nationwide lockdowns caused by the Covid 19 pandemic.
The retailer did not have a sizeable online practice when the pandemic forced the closure of its flagship store, and sales ceased overnight.
In addition, the retailer had already committed to deliveries of the next season’s stock, which resulted in large balances falling due to suppliers, whilst the stock remained unsold.
Kelly Burton, director and insolvency practitioner at Wilson Field, said:
“Unfortunately due to the pandemic, all of the retail stores had to shut as the country went into nationwide lockdown. Without a solid online presence, the flagship store had its sales effectively stop overnight.
We were pleased to arrange a pre-arranged sale of the business and its assets, which meant that nobody lost their job.”
The Directors approached Wilson Field to explore the option of a pre-packaged administration. Following an extensive marketing campaign, the business and assets were sold to an associated company, and all jobs were saved.
Care Homes Claims and MS2U
Kelly Burton • Financial Services • Pre-Pack Administration
Jobs have been preserved at a Leeds-based group of claims companies after they were bought out of administration in a pre-packed sale.
Care Home Claims and MS2U worked with customers who had been mis-sold financial products and services including PPI or had been over-charged on care home fees.
Joint administrators Kelly Burton and Lisa Hogg from Sheffield-based Wilson Field were called in by the directors when the group faced financial difficulties.
The business and assets of the companies were sold, for an undisclosed sum, to Acquire Inc Ltd. As part of the deal, 32 employees of an associated company transferred to the purchaser.
Group managing director Joseph Battle said:
“Problems were encountered as a result of an unprofitable contract and accrued HMRC arrears which lead to a severe cash flow shortage. We took professional advice and worked with the administrators to enable the business to continue as a going concern and preserve jobs of existing staff. Despite this being a very difficult time, the outcome means the business can continue.
“With the same management team, we can assure clients the same high level of service in the future.”
Kelly Burton, director and insolvency practitioner at Wilson Field, added:
“These companies ran into difficulty following the over calculation of work in progress on a contract, coupled with an accumulation of HMRC arrears. The directors contacted us for advice and have worked closely with us to achieve this result.
“We are pleased that the restructuring of these companies has resulted in the businesses continuing to trade via the successor business.”
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