Classic overtrading
Successful business brought under extreme pressure through overtrading following a period of rapid expansion from an already undercapitalised position. Whilst an invoice discounting facility eased the illiquid position the company became vulnerable through dividend payments with a seasonal downturn in sales activity and therefore a loss of debtor cover. The position was not obvious to the bank as their facilities were being respected. The revenue was used as the release valve and ultimately threatened to serve a winding up petition and withdrawn the construction certificate.
We guided the director through the process of stabilising the business giving advice as to the implications of wrongful trading and help with the production of a meaningful budget and cashflow forecast. This in itself gave the business owner confidence that an injection of third party money was appropriate.
Our prompt involvement gave credibility to the situation, confidence to the owner and resulted in a successful application to HMRC for the approval to a time to pay agreement.
As is often the case with our early involvement a crisis was averted at little cost to the company.