business about to go pips up

[worried and harassed]

Hi folks would appreciate your advice,my husband and i have traded as a partnership for 14 years.Six weeks ago however we registered as a Ltd company but the two premises we lease, 2 years (6k per year) and 3 years (25k per year) left to run were taken on as a partnership (we are late paying both rents), we have assets/stock in the business of approx. £120,000 at cost, owe £4,000 hmrc,£5,000 suppliers,£35,000 overdraft HSBC (recently advised us they want to lower to £15,000),£20,000 credit cards, we've work on the books (£20,000 deposits taken from customers,balances of £25,000 on completion) but within 2 days our business credit card bill for £15,000 will bounce and the bank will probably foreclose.We've been trying to raise capital with a mortgage on a property we rent out but it's taking to long to progress and we've run out of time.What can we expect to happen next and how much can we expect to lose? we've both been working 7 day weeks and are exhausted we are running out of fight and need help!

 

[Doodle-Noodle]

How awful for you - I thought banks were supposed to be helping buinesses? Foreclosing now surely is not in line with the promises that have been made - especially since the Bank of England are or have printed a load more money out to get the economy moving!
I guess the only thing you can do is to go to your bank, with your books and show them (a) what work you have coming in & what income it will generate and (b) a proposal of some sort as to how you will reduce your debt to them.
Maybe if you can convince them you have a repayment plan drawn up they will be a little bit more sympathetic?
Also, speak to your landlords, HMRC, all your suppliers and anyone else you owe money to and see if you can extend credit terms/arrange repayment at a lower level.

 

[businessfunding]

Tough times indeed, but can you answer a few questions:

- Have your bank told you they intend to foreclose? They really are not keen to do so these days.

- Is your business fundamentally viable? (not maybe in the future, but now)

- What assets do you have in the business or personally?

If you are absolutely certain that the business works, there are several avenues you can potentially pursue but, on a bleak note - it might actually be time to walk away.

 

[worried and harassed]

Thanks for the reply kickstart, until the direct debit hits on wednesday they aren't aware but our personal manager advised us last time if we could not cover the full amount on the business card it would be removed, without the extra £15,000 on this it's game over. We took advise from an insolvency practitioner 3 months ago (he advised us to go Ltd), he said our books showed we were not insolvent and we should try to trade out of the cashflow problem,we put the last of our savings approx.£6000 in to give us some breathing space but we are a retail shop and people havien't got the spare cash they used to have, so we are losing money weekly.

 

[CashManagement]

It might be worth you getting some expert advice from an Insolvency Advisor - they deal with this all the time and will probably be able to help you, contrary to belief they are not all just interested in making companies insolvent, most are practiced at negotiating with creditors and helping companies survive.

Choose a local firm, someone you can go and talk to, they will probably give you an hours free advice at least.

Good luck

 

[crphillips]

What's the reason for all of the debt? If your working 7 days a week then you must have plenty of work? If so are you doing it so cheap your not making enough profit?

If you have work on the books and you have money coming in and it's purely cash flows issues then you should be able to negotiate with the folk you owe money to (including the bank) and they'll usually freeze interest and such.

If you have no work on the books and none to come in then they will most likely want you to pack up but it's no good for anyone to foreclose on a business that's just having a temporary rough patch.

 

[worried and harassed]

Thanks for the reply, we pay for our stock upfront (industry standard) and then wait for our balance so the overdraft/business card is working capital, our average delivery is between £5,000 and £10,000 so it's very easy to go into the red, we dropped our margins 6 months ago due to being quiet and online competition. We have spoken to the hsbc re our problems but they've been told to reduce their commitments so they have been putting pressure on us to reduce the £35,000 overdraft we've had for 10 years to £15,000 anyway.

 

[JandJC]

Thanks for the reply, we pay for our stock upfront (industry standard) and then wait for our balance so the overdraft/business card is working capital, our average delivery is between £5,000 and £10,000 so it's very easy to go into the red, we dropped our margins 6 months ago due to being quiet and online competition. We have spoken to the hsbc re our problems but they've been told to reduce their commitments so they have been putting pressure on us to reduce the £35,000 overdraft we've had for 10 years to £15,000 anyway.

Restructuring your business may be a solution, it sounds to me that you have put a lot of investment - time and money in trying to make it successful.

It will be a hard decision to just "walk away".

Private message me with your contact details so that I can contact you by phone and discuss this more; developing a restructuring plan could work in your favour - there are no guarantees but its worth the risk from what I have read to date.

 

[worried and harassed]

Thanks for the advice JC your right we set this up from scratch and we've given up a lot to get it to this stage, whilst panicking about the personal debt i'm also aware that we've taken money for orders we may not be able to fulfill morally it doesn't sit well and if we can work through this we're willing to do whatever is necessary to keep it going or at least walk away with a clear conscience, has anyone on the forum had experience with what sort of percentage a landlord might accept to allow a lease to be broken. I think in the present climate they would have a problem finding a new tenant.

 

[worried and harassed]

We did take advice from an insolvency practitioner 3 months ago (re the Ltd company new status) but he said we weren't insolvent and should try to work through it, we put another £6,000 in of our savings to give us a buffer zone but we are losing money weekly and relying on the general public for sales, most of whom are struggling themselves i can't see an improvement any time soon.

 

[JandJC]

Thanks for the advice JC your right we set this up from scratch and we've given up a lot to get it to this stage, whilst panicking about the personal debt i'm also aware that we've taken money for orders we may not be able to fulfill morally it doesn't sit well and if we can work through this we're willing to do whatever is necessary to keep it going or at least walk away with a clear conscience, has anyone on the forum had experience with what sort of percentage a landlord might accept to allow a lease to be broken. I think in the present climate they would have a problem finding a new tenant.

ALARM BELLS are ringing - Point 1 if you are unable to fulfil orders, you are realistically "insolvent"; you should not be trading if you can not provide the product or service to paying customers.

I think you need some expert advice...Private message me in the first instance; I'm willing to forsake my fees at this moment in time due to the situ you are facing.

 

[QuickHomeBuyers]

ALARM BELLS are ringing - Point 1 if you are unable to fulfil orders, you are realistically "insolvent"; you should not be trading if you can not provide the product or service to paying customers.

I think you need some expert advice...Private message me in the first instance; I'm willing to forsake my fees at this moment in time due to the situ you are facing.

I reckon, OP is saying if they go T up, in that case they may not be able to fulfill the orders. Nothing to do with "not trading while insolvent"

 

[JandJC]

I reckon, OP is saying if they go T up, in that case they may not be able to fulfill the orders. Nothing to do with "not trading while insolvent"

Missed the OP's comment prior to my one going up, hence the confusion.

 

[worried and harassed]

Thanks for all the replies guys it's a relief just to be able to discuss it i'm not sleeping well at the moment hence the time. If we have time i'm sure we can find a way out, yes we could sell the rental property but with a rent of £550 per month coming in and £220 mortgage going out it doesn't make sense unless the bank forces us to do it. We've bought the materials in to fulfill the orders but it takes time (we have an 8 week turnaround) and the hsbc are laying their own staff off at the moment so their not being supportive with us.

 

[businessfunding]

Do you or the business have any assets to secure against?

It is possible to raise money against fixed assets in a matter of days.

Again, I would stress that this approach only works of you know that there is a viable underlying business.

 

[MikeJ]

Thanks for all the replies guys it's a relief just to be able to discuss it i'm not sleeping well at the moment hence the time. If we have time i'm sure we can find a way out, yes we could sell the rental property but with a rent of £550 per month coming in and £220 mortgage going out it doesn't make sense unless the bank forces us to do it. We've bought the materials in to fulfill the orders but it takes time (we have an 8 week turnaround) and the hsbc are laying their own staff off at the moment so their not being supportive with us.

There's your problem. You're making a profit on the rental property, and you're getting a return of £330 per month but you've got a of capital tied up. Freeing that capital would allow the business to make a better return.

You have to be honest with your figures, on how it stands today and how the future looks. If you can make a profit, and that profit is sufficient for your needs, then you need to sell the rental property to get more cash. Or remortgage it, if necessary.

 

[mhall]

Have you looked at crowd funding? From the sound of it you just need a buffer zone of working capital, which you have with your current overdraft. If you are sure that the business will work and that it is "just" a cash flow thing, then somewhere like funding circle may well be useful to you. I am not suggesting you borrow money you won't be able to pay back but your predicament is familiar to countless people.

If you can prove the light is at the end of the tunnel and it could get brighter with a gentle nudge, then change your bank abnd get nudged.

 

[worried and harassed]

never heard of crowd funding, i'll look it up meanwhile trying to stay positive i've contacted a couple of alternative banks to see if they will offer us an overdraft at our present amount, and i'm on the phone to our customers pushing to get their balances in and goods out, we've done this for 14 years and we are good at it, i don't want to stack tins in asda but i do need to push our internet site and add an ecommerce section if i can get us through this difficult period. Thanks for all the advice.

 

[deniser]

Can't offer any advice but I am really sorry to hear of your troubles and hope you find a way round them.

 

[VSpy1]

what is it you sell?

 

[worried and harassed]

furniture, real wood not plastic rubbish, we also manufacture ourselves but theres very little money left in this because of the cheap imports, unfortunately for us i'm old fashioned i like to do a good job not just turn money over.Most of the work we do are recommendations and repeat customers but it's difficult to compete with the chaps that set up websites from out of their garden shed and then change their name when the service calls pile up.

 

[VSpy1]

I dont know much about this, but would it be possible to shift the balance and deal with some imports....if it means it could help profits, for the time being at least..?

 

[mhall]

Have a look here www.fundingcircle.com , it certainly sounds like you hit the criteria they are looking for

and in true BBC style: "Other crowd funding sources are available" !!

 

[worried and harassed]

Thanks for the advice, we do sell imported furniture in fact about 80% of our sales are of this nature and then we make anything we can't source or to the customers spec, i've managed to half the deficit by spending the day on the phone pulling in balances so i'm hoping the bank manager will be willing to listen, hadn't heard of the funding circle before didn't know things like this were out there until i came on this forum, definately worth a look see in case i can use to raise the money for a good ecommerce site.

 

[fashionprintdesigner]

Hi

just here to offer my support. I really hope it doesnt get to you too much, I know its stressful. Its so sad for hard workers to be in this position. Seems this country helps out the lazy bug*ers no end.

I shall send positive vibes

Mandii

 

[Talay]

You have my emotional support as well.

Do what you can to get through this next period but you will have to seriously look at what you sell, how you sell it and if you are utilising a significant percentage of your available resources to manufacture products the old fashioned way which then generate no profits, then this will have to go I'm afraid.

 

[crphillips]

Do you think your problems are because of the recession or has business gradually declined due to online retailers and changing trends?

If its because of the recession then it's whether you can ride it out and come out of the other side. If you think it's generally gone down hill due to the market changing then it may be time to get out and do something else or join the rest of the online sellers and cut your overheads.

 

[Alan R Price]

[FONT=verdana, geneva, lucida, arial]worried and harassed[/FONT]

You mentioned that the business is losing money. That indicates to me that there is a more deep-seated problem than cash flow. Any investor will want to know what is going to change to return the business to profitability. For example, you may have to compromise on your ideal of quality to improve your margins; or find some way of getting to the customers who are prepared to pay for the "Rolls Royce" package; or getting your existing/past customers to buy from you more frequently. If you cannot do this, any injection of cash will only delay the inevitable and you will just be digging a bigger hole for yourself. Retail is not going to get any easier over the next couple of years, and new customers are not going to fall out of the sky. The businesses that survive will be those that adapt to the conditions and alter their business strategies and techniques.

There are some very simple, low-cost techniques for improving business performance, some of which can have a virtually immediate effect. It may be you have tried some of them already but possibly not: for example, going through your customer lists for the last few years and ringing everybody. Just a thought.

 

[FIZIX Agency]

I want to follow on from Alan R Price' post...

Personally I would do three things:

1. Sell or remortgage the rental property if you want to save this business; or if this business could take that income stream with it (I skimmed some of the posts so excuse this if what I'm saying there is irrelevant).

Use the finances from that to get your debts either paid or in good standing.


2. Restructure
Look at your company and optimise it; find where you are loosing money, find where you are making money and focus on what makes money and/or fix where you are loosing.


3. Online
This is my main point, you hit the nail on the head; online competition. You can still trade as a shop but being online is important; speak to a good firm who understands more than just building the site but also how to market you online & how you can trade over web services and get yourself moving online.

There is a reason why online companies are overtaking those who aren't and it isn't all down to price; but a revolution in how people are connected and how they purchase.

 

[WHARTY]

Thanks for the reply kickstart, until the direct debit hits on wednesday they aren't aware but our personal manager advised us last time if we could not cover the full amount on the business card it would be removed, without the extra £15,000 on this it's game over. We took advise from an insolvency practitioner 3 months ago (he advised us to go Ltd), he said our books showed we were not insolvent and we should try to trade out of the cashflow problem,we put the last of our savings approx.£6000 in to give us some breathing space but we are a retail shop and people havien't got the spare cash they used to have, so we are losing money weekly.

Can you explain why the insolvency practitioner suggested you go LTD? was it so you wouldn't be personally liable for any debts? if so, surely any liabilities
owed when you were a partnership/self employed would still be your liability and not the new company?

I am not having a go in any way i just want to understand better.

 

[Joe1up]

Hi there, you might want to drop an email to a guy called David Hodgson, he's now gone totally independent but worked for Grant Thornton was a director for Begbies Traynor and also held directorship for Bartfield and co.

His website is davidhodgson(dot)net and has all his contact details. He'll have a chat with anyone for who needs advice and won't charge.

 

[megamuel]

3. Online
This is my main point, you hit the nail on the head; online competition. You can still trade as a shop but being online is important; speak to a good firm who understands more than just building the site but also how to market you online & how you can trade over web services and get yourself moving online.

There is a reason why online companies are overtaking those who aren't and it isn't all down to price; but a revolution in how people are connected and how they purchase.

I agree with this point. My question to 'worried and harassed' - Are you online already? If not, why not? If so, do you get many sales through your site?

Sam.

 

[Alan R Price]

He'll have a chat with anyone for who needs advice and won't charge.

A bit like me then

 

[WilliamsData]

You mentioned that a lot of the competition are online. Can you explain why you are not.

If they are taking a lot of your business then you need to be where they are. Lots of people these days will turn to the internet first when looking for things, so if your not there your missing out.