Facts
Background
The
company had traded for three years and annual turnover had grown to
£550,000. A recent abortive
diversification into the US had incurred a one off loss of £50,000.
Problem
With
arrears to HMRC the bank was demanding a reduction in its overdraft
facility. Without further funding the
business could not survive.
Solution
The
company had sufficient cashflow to continue trading whilst external funding was
sought. We worked with the accountants
who referred the case to produce forecasts which showed that with additional
funding the company could quickly grow to make profits of £100,000 plus per
annum. A shortlist of potential
investors was assembled from our turnaround business angel network and an
investment of £110,000 was made. The
chosen investor was a highly experienced business angel who became chairman of
the company. He and the management team focused
on an exit within five years.
Difference
The
company had hit the buffers and most insolvency practitioners would see this as
a liquidation. However, most of the
company’s customers were large national organisations and a new company would
not have been able to get accreditation to do the work. Our involvement avoided a cashflow problem
becoming a cashflow drama and gave the business a second chance without
creditors losing a penny.