Considering insolvency during the COVID-19 crisis: take a deep breath

Published: Tuesday 24 March 2020

In these uncertain times, if you find your business in financial crisis, you may consider insolvency. However, the advice from Hazlewoods Business Recovery and Insolvency team is to be bold and take a breath. 

The Government is announcing new measures almost daily to help businesses through this period, which you can read more about here

Now is the time to take stock, review your position, and ensure that you understand the potential risks to your business. Giving some thought to an emergency business plan for recovery and repayment will put you in a good position to have discussions with lenders and creditors. 

Cashflow management will be key during this time and we would recommend preparing a cashflow to identify pinch points, updating for Government and other assistance when it becomes available.

Elements that could help include:

  • Deferring rates payments
  • Agreeing rent and other expenditure deferrals
  • Deferring capital expenditure
  • Updating your credit control procedures
  • Reviewing and possibly reducing your stock levels
  • Reviewing any contractual obligations and advance orders you may have in place
  • Talk with key suppliers. These conversations may be easier than you think. For example:

Many other businesses will be in a similar situation. Speaking with key suppliers about immediate cashflow problems may not only assist with cashflow, but also forge better relationships moving forward. 

Many landlords and tenants have already been having conversations about, and coming to voluntary arrangements around, their rental payments. The ban on evictions for all commercial tenants who miss rental payments due to coronavirus will provide some protection for businesses, but it would be wise to have discussions for future payments too.

Does my business use assets subject to finance? If so, would they want to enforce and recover assets which in the present climate might be difficult to sell?

Business Recovery and Insolvency Partner, Pete Frost, commented: “Unless there are fundamental trading issues within the business which mean the company will not survive and needs to consider insolvency options, we would advise taking a deep breath, assessing the options available to enable business owners to make more informed decisions. 

The message we are largely hearing across the board is to keep people and business going. Including from Andrew Bailey, Governor of the Bank of England, who stressed to the public ‘we will be there to support your needs’. 
If owners are still concerned about the ability to trade, we are here to help.”

“The message we are largely hearing across the board is to keep people and business going. Including from Andrew Bailey, Governor of the Bank of England, who stressed to the public ‘we will be there to support your needs’.”

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Peter Frost
Peter Frost
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