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View Full Version : In a bit of a hole - How to get out?


crphillips
1st May 2011, 15:19
Our business does well but i'm wanting to move on with my life and my business but i'm struggling to do so due to cashflow.

A few years back we bought another business which went very badly due to being conned by the previous owners. I won't go into the details as it's quite lengthy but if your interested search my previous posts.

To cut a long story short we lost somewhere in the region of 330k and the previous owner has been in and out of jail since.

I have another business which does well but due to our increased debts after winding the other business up our personal outgoings are excessive. We've built up the other business and can cover our outgoings but we're always a little too close to the bone and we're constantly keeping our eye on the bank account.

This is a real shame as our business makes good money and we were on trakc to really going somewhere with it. We turnover approx 350k per annum and take around 80k-100k in wages.

In the middle of all of the trouble with the previous owners we missed some payments on credit cards, loans, direct debits.....etc but nothing too serious. We got caught up and have paid everything on time for a year or so.

Our bank, HSBC have been pretty understanding and we have a fairly decent relationship with our bank manager.

The thing is that we're not really putting any decent amount of money in the bank and we can't afford to expand. HSBC won't lend us any more money and I've got to admit that our bank accounts don't look too healthy.

I have two ways in how our business can progress. If i could just get my hands on 20k I could progress with these other two routes of revenue which would be sure to provide us with a much greater income. This would enable us to pay all of our debts faster and build the business as we would like.

Otherwise we'll simply carry on doing what we're doing and not advancing to where we want to be. The other avenues i'd like to expand into are fairly easy as they tap into our existing client base and are in the same kind of industry as we're already involved in.

The HSBC are reluctant to lend us any money. I already have a full order book for one of the services we'd like to offer but we just need the lending to make it happen. Do you think if i showed this to a lender they would lend us the money? I always feel with banks nowadays that they just tap the figures into a computer and if it's yes it's yes and if it's no it's no......there seems to be no personal judgements made by a real person any more or am i wrong?

WJP
1st May 2011, 16:01
Regarding these new sources of revenue, how long would it take you to get them up and running? Because if it's only a short period of time, you could consider invoicing companies for the work (with a long period to pay) and then factoring the invoices. Have a look here if you need an explanation of how factoring works:
http://www.dfsfactoring.com/how-does-invoice-factoring-work.html
(I've got no connection to them or any company doing this, just so you know).

LicensedToTrade
1st May 2011, 16:39
Regarding these new sources of revenue, how long would it take you to get them up and running? Because if it's only a short period of time, you could consider invoicing companies for the work (with a long period to pay) and then factoring the invoices. Have a look here if you need an explanation of how factoring works:
http://www.dfsfactoring.com/how-does-invoice-factoring-work.html
(I've got no connection to them or any company doing this, just so you know).

Far too risky in this situation. To draw on the OP's thread title 'In a bit of a hole - How to get out?' using a factor would be like trying to get out of the hole by digging deeper...you might hit a ladder but you might find it all caves in on you.

It sounds as though Business A is fairly healthy and it is the fallout from Business B that is causing the problems. Rather than try and overstretch yourself by tinkering with healthy Business A, it might be an idea to keep going as you are until you clear your outstanding debt OR take a look at developing a new Business C as a separate limited company.

tony84
1st May 2011, 16:51
can you not look to take out a further loan with the bank but with a directors guarentee?

Or look for a company other than your bank to offer a loan?

crphillips
2nd May 2011, 10:15
Business A is a partnership.....not LTD.

The other methods of revenue i've mentioned could be a totally seperate company. It's aimed at the same clients but it is a separate service with separate vehicles, staff, products.....etc.

I suppose i'm just concerned about lending as i've tried to get a few personal loans and have been knocked back and with all of the talk about banks not lending i'm a bit reluctant to spend anymore time on it.

If i set up a new company....say Company C.......if i set this up as a ltd company would i be more or less likely to get funding? Or seen as my other business is a partnership would i be best setting up as a sole trader initially and try to get funding that way? Does it make any difference as i assume when looking for funding for a Ltd business they'll look into the credit history of the directors anyway?

Thanks for you help and feedback so far.

Alfa Amore
2nd May 2011, 19:19
A few ideas for you
1. Sell and lease back any vehicles or equipment

2. If it's a service get the customers to pay 3 months in advance

3. If its products you are providing you may be able to lease them to

4. your customers and persuade your supplier to advance you credit on the strength of a purchase order

5. Some suppliers will invoice the customer on your behalf for the full amount and credit you your profit, this on;ly works where you have a good relationship with your client and your supplier.

6. The bank may advance you money on the strength of a purchase order on a deal by deal basis.
I would tend to avoid invoice discounting especially if the invoices are not due for payment for some time as the interst will be punative, and expose you to the risk of charge backs which will further weaken you cash flow

termsandconditions
3rd May 2011, 08:36
OP, what are the aged debtor reports (adr's) like for your businesses A an B?

Because if only half your customers of Business A paid you at, say. 60 days rather than 30 days then there's a good chance that a £15k boost to your cash flow could be liberated from your debtors. That's a big chunk of the £20k you seek.

All it would take is an overhaul of your credit management system. And if you adopted the same approach to your potential new business C, then you might not even need the full £20k.

PM me with a summary of your adr's or e-mail them to me at john@termsandconditions.co.uk and I'll give you a more specific view of the typical cash flow benefits that could accrue.

Best Regards

Bri
3rd May 2011, 09:03
Also you quoted a figure 80-100k in salaries, yours & partner or the entire workforce?

What if you temprarily reduced that by 20-30k, paid dividends for the shortfall. Your situation can only get better as you are ontrack with your payments of Company B which in turn will see things improve in the future.

TBTB
3rd May 2011, 11:12
I can't see too much benefit in creating Company C - the overheads involved would outweigh any perceived advantages.

How many employees do you have? If the need for cash is short term and you have a full order book for your new revenue earner, can all or some of them (including you!) be persuaded to ease your cashflow problems by taking a salary holiday in return for a guaranteed bonus at a later date?

How is your personal credit standing? You could apply for a personal overdraft or there are plenty of 0% card offers around, either of which could enable you to inject some cash at the appropriate times.

With £30k a month coming in, and new revenue on the horizon, I would be surprised if you can't blag £20k for a month or two by juggling your finances and robbing Peter to pay Paul. Good luck!

Geoff T
4th May 2011, 18:11
Good advice folks... anyone heard from the OP since a pay cut was suggested?

termsandconditions
4th May 2011, 20:16
Good advice folks... anyone heard from the OP since a pay cut was suggested?

Naughty! :)

Geoff T
4th May 2011, 20:35
Naughty! :)

Feel free to slap me if I'm proved wrong... ;)