Trading Out of Financial Difficulty – Is It Possible?

Image by Gerd Altmann from Pixabay
3 years ago

 During the lifecycle of a business, you may encounter bumps along the road and financial strain as a result of challenging market conditions, changing consumer needs and gaps in cash flow. It is natural for income to fluctuate, however, if your business is experiencing long-term struggles, simply biding your time until the situation improves may result in the financial health of your business to quickly deteriorate. Failure to proactively seek support for your ailing business could result in extinguishing any real chances of recovery.

If your view is to trade out of financial difficulty, putting support measures in place can help stabilise your business and prepare it for recovery. In addition to conducting a health check of your company, a business rescue expert can help determine if a formal restructuring procedure should be administered to protect your business. By reaching a middle ground from which you can trade out of financial difficulty and come to a revised repayment agreement with creditors, you can give your business the best opportunity to survive.

What formal restructuring procedure is suitable for my business?

As your primary concern, you should focus your attention to the root of the problem to reassess your financial position. If you are contributing an overwhelming amount to creditors which is pushing you into financial difficulty, finding a solution which allows you to restructure payments with creditors could provide your business with the breathing space it requires.

A Company Voluntary Arrangement (CVA) is a formal insolvency procedure which is entered into voluntarily. A licensed insolvency practitioner will be responsible for assessing the financial position of your business, arriving at a conclusion which details your repayment ability. Your eligibility will be based on several factors, from company financials and whether your business represents a realistic chance of recovery.

After considering this, the insolvency practitioner will propose a repayment plan, subject to creditor approval. The business rescue professional will mediate between all parties and arrive at an agreement which works in the best interests of both parties. The agreement will typically last between two and five years, suitable for businesses with realistic potential to recover and thrive following completion of the restructuring process.

If you are on the receiving end of serious threats from creditors and expect to be forced into compulsory liquidation as a result of a winding up order, entering a CVA can halt any legal action against your business, allowing for a recovery to be made. This route not only improves cash flow but can help improve the resilience of your business.

Why is a Fast Track CVA suitable for businesses hit by Covid-19?

A Fast Track Company Voluntary Arrangement supercharges Covid-19 business recovery by compressing the process into as little as six weeks. As the coronavirus pandemic tears away at customer bases, erases income and makes core industries temporarily redundant, companies which were once thriving are struggling to stay afloat. This unprecedented period of trading has rocked the economy, resulting in consumer behaviour to become volatile due to everchanging public health measures.

A Fast Track CVA caters to businesses struggling as a result of the economic uncertainty posed by the coronavirus pandemic. This procedure is suitable for businesses on the brink of collapse, fighting against time to make a recovery. A Fast Track CVA can help equip your business for an uncertain future, such as the one currently posed by Covid-19. By healing weak businesses promptly, a Fast Track CVA can afford time for recovery and improve survival rates.

The financial state of your business will largely dictate if you can make a full recovery with formal support measures in place to bolster the process. It is possible to trade out of financial difficulty, but this will largely depend on company assets, cash flow and your balance sheet.

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