My cash flow is under pressure

Cash flow pressure is a common problem. Most businesses suffer from it at some point, including many very profitable businesses.

We explain below some of the steps you should consider to deal with cash flow pressure.

Contact us for an in-confidence discussion about your situation to find out how we can help.

Negotiate with your creditors

The simplest way to deal with cash flow issues may be to speak to your key creditors – whether that’s suppliers, lenders or landlords – to ask for breathing space. Be pro-active in approaching them – pick up the phone or email them to explain your situation and set out a sensible transparent proposal for extending credit or rescheduling payments.

In some cases these negotiations will benefit from having a restructuring professional involved; they can lend credibility to your proposal, put across the seriousness of the position and assist in negotiating with the different stakeholders. Effective action at this stage can prevent the situation from becoming more serious.

Time to Pay Arrangement (TTP) with HMRC 

If HMRC arrears are a significant part of your cash flow issues, it may be possible to obtain agreement from HMRC to pay the arrears in instalments over an extended period (also known as Time to Pay or TTP). This is a very common solution to cash flow issues.

Contact HMRC and give them a realistic proposal for how you are going to deal with the arrears. They are used to dealing with this sort of request. If your past payment record is reasonably good and your make a realistic proposal they may be willing to provide some extra time to bring the arrears up to date. Find more detail on TTPs.

Additional borrowing or refinancing 

If support from creditors isn’t enough to plug the gap, you could consider borrowing options.

Your existing lender might be willing to provide more support, such as a temporary increase on and overdraft or a higher drawdown rate on a factoring or invoice finance facility, if you can demonstrate that the business is viable over the longer term and you’ll be able to repay the additional borrowing.

But even if your existing lender isn’t willing to help there’s a wide range of alternative lenders, who could provide a solution.

These comprise asset based lenders (who will generally lend against sales invoices, plant and equipment or stock), peer to peer lenders (also known as crowd funding) or bridging funders. Whilst alternative lenders are generally more expensive than high street banks, they tend to be more agile and more open to lending to businesses experiencing financial stress.

Rescue procedures

If you have exhausted the above options or don’t think they will be enough to solve your problems there are formal rescue processes which can help you preserve your business, if you think it is viable in the longer term. A CVA is an all-encompassing deal with creditors to repay them over a period of time and (usually) write off part of the money they are owed. Alternatively a statutory moratorium or administration order might be appropriate to protect you from creditor action whilst a buyer is found for the business.

Insolvency procedures 

If the worst comes to the worst and you think that your business is no longer viable, the right course of action may be to put it into liquidation. This procedure allows directors to hand over the company to a liquidator who will deal with winding it down, collecting in the assets and repaying whatever money is available to creditors. This is clearly a serious step, but sometimes it is the right choice both in terms of a director’s peace of mind and also his / her statutory obligations.

Stephen Goderski

Director - London

t: 0207 516 2224

e: stephen.goderski@pkfgm.co.uk

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