As expected, the number of corporate insolvencies has risen sharply over the past twelve months and, given the current cost of living crisis and the ongoing inflationary pressures affecting demand, we anticipate that this trend will continue for the foreseeable future.
NatWest have reported that the number of late payments on business loans more than doubled in the first half of this year and, like us, are warning that there is worse to come.
We are seeing many businesses that are suffering severe cashflow issues and, in some cases, company directors have sought other sources of finance to prop up the monthly finances. Where this has been done following an in-depth financial review this can be an effective solution, but we have seen some businesses where directors have signed finance agreements in something of a panic and not read the small print. This has resulted in directors inadvertently taking on expensive debt or providing personal guarantees so putting their own assets at risk. We want to highlight the fact that personal guarantees allow the provider to seek recovery from the company directors when things go wrong.
We are also seeing companies where, following our initial review, it has become apparent that the liabilities were far greater than the directors believed. When a business is booming, it is possible for a business to survive without detailed projections, but in challenging times this will very quickly damage the business.
We would urge all company directors to carry out, ideally with the assistance of an independent advisor, a comprehensive financial review and to adapt their business plan based on the current position and anticipated changes in both sales and overheads for the next 12 – 24 months.
We urge every business owner/director that is facing financial difficulties to act decisively and seek independent professional advice before it is too late and that is why we are always available for an initial zero cost assessment which can be arranged by contacting Donald Scott.