If your business is experiencing financial difficulty, don’t worry; you’re not alone. Tens of thousands of businesses experience debt problems every year, of which, thousands enter a process of liquidation. That figure would almost certainly be lower if people were aware of the alternative company rescue options that are available.
However, choosing the correct method for negotiating a business turnaround can be the difference between success and failure, so expert advice on which company rescue option is suitable for you is paramount. An expert in business turnaround strategies will often look at several areas of a company:
Is the business model sustainable? The first decision to be made will be whether the implementation of a company rescue strategy is even feasible. Many businesses fail and develop debt problems because, ultimately, the business strategy is unsustainable.
If the business is seen as sustainable, a business turnaround strategist will need to see which areas need to be restructured and developed. This process alone will often be enough to get a business back on track.
Alternative and added streams of finance may be sought to aid the debt problems. Stock, debt or asset finance, as well as general and equity finance may be investigated.
A management of turnaround programme could be used to change the internal management structure.
Some of the key areas used by businesses to get their company finances back in order are:
Individual Voluntary Arrangements (IVA)
IVAs will often benefit individual traders who are experiencing problems with debt. A business recovery specialist will need to assess the trader’s business strategy, financial history and future potential to decide whether debts could be repaid through future profits. This option will be beneficial to an individual trader and to their creditors, as the individual will be able to continue trading, and the creditors will eventually see a return on their investment.
Company Voluntary Arrangements (CVA)
Similar to IVAs, CVAs allow a company, rather than an individual, to repay their debts through future company profits. CVAs also allow for a company to repay their debts without being wound up or liquidated, which is beneficial for the business and the creditors, who ultimately, want a return on their investment.
Liquidation is often seen as a last resort in business advisers who seek to offer company rescue options, but it still remains as a possible option for companies in severe trouble with large debts and little or no way of demonstrating the possibility for future profits. All company rescue options should sought before proceeding with liquidation, as a more suitable option that could see your debts changed to profits may be available.