Business Insolvency - What to Do If Your Business Goes Into Insolvency
Business Insolvency - What to Do If Your Business Goes Into Insolvency
Whether it's the loss of a key client, a dispute with management, or deficient financial management, your business can go into insolvency. If you find yourself at risk of this, there are steps you can take to get your business back on track. However, you may need to seek advice before acting on the information in this article.
One of the first signs that your business may be on the verge of insolvency is a decrease in cash flow. This can be due to falling revenues, delaying payments to suppliers, or insufficient cash to pay debts. Ideally, your business should be able to make payments to all creditors on time, but it can be hard to do when you don't have the funds. A small business may need to borrow money to fund its growth plans. If you can't pay your creditors, you may face severe penalties. business insolvency advice
A quick insolvency check can help you assess the extent of your debts and your assets. A cash flow test will compare your current working capital with your forecasted sales and payments. The results will help you understand whether you have the financial capability to keep your business afloat.
You may want to consider a voluntary arrangement to help you deal with your debts. This allows you to continue trading and pays off your debts on a more flexible basis. An administrator takes over your business and works out a plan to get you back on your feet. The administrator will also make a proposal to your creditors.
It is also possible for you to sell your business. A willing buyer would pay a fair market price for your business. This is a smart move, as it may help you get out of insolvency without having to incur the costs of liquidation. However, you must keep in mind that if your business isn't profitable, you may be unable to sell your assets and your debts will remain unpaid.
You may also be able to get a loan from commercial finance companies. You can also try to negotiate with creditors to restructure your debts. You may be able to enter an invoice discounting or factoring arrangement to help you pay off your bills. However, keep in mind that you may need to pay a higher interest rate on a loan than you would for an overdraft.
If your business has been through a rough patch, you should consult with an insolvency practitioner. Insolvency lawyers can help you navigate the process and ensure you comply with all the laws. They also offer free advice by telephone or via the internet. During the process, you will also be able to receive support from an accountant. This is important because your accountant can give you great reassurance. business insolvency helpline
Another way to check if your business is insolvent is by calculating your liquidity. This is the amount of money you have available to pay your debts, including your short-term debts and any assets you own. If you have a large amount of cash, you may not need to seek financial assistance. On the other hand, if your cash flow is poor, you may be struggling to pay debts due within the next three months. This can be a huge red flag.