Almost every small business will encounter cash flow problems from time to time.
If you’re a sole trader rather than a limited company, this can be particularly alarming, as you can be held personally liable for any debts.
So, what should you do if you have bills you simply cannot pay?
Try to borrow your way out of trouble
The first step is to identify whether the business has run its natural course. If not and if you are still profitable and growing, then you should attempt to borrow to meet your current financial obligations.
Banks have become extremely cautious lenders since the financial crash of 2008 and are notoriously slow to make decisions, but at Cashsolv we can arrange an emergency loan and have funds in your account in under 24 hours.
Talk to your creditors about your cash flow problems
If you’re unable to borrow but want to keep your company in business, then you should talk informally to your creditors, explain you are experiencing temporary cash flow problems and negotiate extended payment terms or larger discounts.
Make a full and final settlement offer
If your creditors are unwilling to work with you to relieve your cash flow, then you can make them a full and final offer of some proportion of the sums you owe.
Of course, you will need to strike a careful balance between what you can afford and what your creditors are likely to accept, and they are under no obligation to agree to such an arrangement.
Negotiate a Time To Pay Arrangement with HMRC
If your debts include unpaid corporation tax, or worse still VAT, your first move should be to talk to HMRC as they have wide-ranging collection powers.
If you contact them immediately on encountering cash flow problems, rather than burying your head in the sand, they may be amenable to a Time To Pay (TTP) arrangement, which allows you to spread your outstanding bills over a year.
You should be aware, however, that if you fail to adhere to such an agreement, they are unlikely to offer you any more leeway.
Individual Voluntary Arrangement (IVA) or Company Voluntary Arrangement (CVA)
If all else fails, you should consider an Individual or Company Voluntary Arrangement, depending on whether you are a sole trader or limited company. An IVA can embrace both your personal and business debts and usually involves an arrangement to pay some portion of what you owe over five or six years, with the remainder being written off.
A CVA operates similarly, and when invoked gives you breathing space from legal action whilst your insolvency practitioner negotiates with creditors. Most importantly, an IVA or CVA will allow you to continue trading and to remain in charge of your own business.
Cashsolv are experts in CVAs and all other aspects of insolvency, and if we can’t help you finance your cash flow problems then we can assist you in avoiding bankruptcy.
To discover what we can do, please find out more about our CVA service.