Closing Business Down - Help!

[savvyshopper]

I am looking to close my business down as it isn't paying to keep it running. Basically I made my only staff member redundant last September to save costs, as I did the figures and it worked that without her the business would be viable. Then we saw another down turn in trade. I am now working the business FREE 6 days a week. The lease is up in January. Obviously this cannot continue.

Debts - Bank £20,000 Loan with personal guarantee. (3.5 years remaining)
Creditors - £8,500 Stock
HMRC, V.A.T - £3,500
Misc - £3,000
Back Rent -£7,500

Value of Stock in store at cost - £12,000
Business Assets (Real Value) - £2,000

Cash at Hand - £800

On a personal note I have £10k of credit cards which I am now on a informal payment arangements with them.

I don't own a property, however my partner does, although she has nothing to do with the business. I also have no other assets of any value.

My Dilema is this I could trade another 6 months FREE to reduce the bank Loan further. Or I could close the business down now. However I do not have the funds to pay liquidators or administration.

What would be the best way around this and how should I deal with the Bank.

This isn't something that I am taking easily as I have had this business for 12 years.

Please offer as much advice as possible and also ask any other questions if you need the info to help me.

 

[mhall]

Are you a Sole Trader or Limited Company?

 

[savvyshopper]

I am A LTD Company

 

[mhall]

Search for posts by Spongebob, he has put an excellent letter together to send to everyone you owe money to. Unfortunately the personal guarantee will be valid so you need to try and get that down as much as you can.

I assume your supplies have a retention of title in their terms and conditions so offer them their own stock back if you want. Personally I would have a closing down sale to try and get as much money as you can to pay off the bank. Then close the shop and walk away. If you can pay anyone else off then do so.

 

[savvyshopper]

Just a Quick note that may make some difference I have put into this company £180,000 as a directors loan. Dont know if this would make me the preferential creditor.

 

[mhall]

Not unless you drafted a document saying so, it was a Directors loan that the company can't afford to pay back. That will no doubt hurt but, as there is no money in the business anyway, it is what it is.

Spongebobs letter has been posted a few times, but you will find a copy of it in this thread: http://www.ukbusinessforums.co.uk/forums/showthread.php?t=259912

 

[savvyshopper]

Thanks for that. I just didn't know if it would put me in a more favourable positions with the banks and other creditors. However I am not that concerned about the money, at the end of the day it is only money. I would rather have my life back.

Thank you for posting the link.

So As I effectively will become unemployed I presume if the bank chase the £20k loan the best avenue is bankruptcy. even if I were to take employment I think the best salary I could get is about £15k because of the area that I live in. This factored in with the Credit Cards and Landlord debts, make an IVA a untenable option. Or am I wrong????

Thanks

 

[tezza12]

cant you stay open for 6 months, re-invent your shop or brand, bit of paint or something then do a sale, just try to get the debt down in the next 6 months, you must get xmas revenue, then walk after that.

 

[Deleted member 138423]

I trust you have had this specific discussion with your accountant? If not, I would think that would help you immeasureably!

 

[savvyshopper]

Hi.

I have already done a store refit 6 months ago to try and revitalise things. However that was my original plan to trade for another 6 months to get the Xmas trade in and also A/W is busier anyway. The only thing is I don't know if it will help my longer term situation in the sense that I will still have approx £16k owing on the bank loan at this point. I should have cleared HMRC and should be able to zero down the supplier creditors. Although this would mean me having to do 6 days a week for FREE for another 6 months and I was doing some other work outside of this business which was enabling me to make a living, however I have lost this contract meaning my external earning potential is now £0.

My main concern is the bank Loan as this is the only thing anyone can come after personally.

I have always traded in the best interest of the company and also its creditors hence working for free the last 6 months. So I have no issues with any meetings that may be called.

My partner's wage will support both of us "JUST" although she wants and you can appreciate this the best thing to be done for the business and also for myself personally.

Any advice is much appreciated with a variety of scenarios so I can make the best choice.

 

[savvyshopper]

I trust you have had this specific discussion with your accountant? If not, I would think that would help you immeasureably!

Hi My recent accounts have just been done and will be having a conversation with him with regards all of this in the next couple of weeks to help make a final decision, although his advice costs money and its free on here, so wanted as much info as possible to help make these decisions.

Thanks

 

[tezza12]

is the bank debt (loan/overdraft) secured or garunteed by anyone

And why worry so much about paying the supplier debt

 

[mhall]

Your main goal should be to protect yourself whilst doing nothing illegal. Reduce your bank loan first and foremost. If you are planning on using your suppliers in the future, pay them off if you can, if not - send the letter out and stop trading (hence the need for a closing down sale)
As an employee you have a right to be paid, so pay yourself (and use to reduce the loan) - there is absolutely nothing wrong in doing that.

 

[Alan R Price]

You have posted about this previously, and I have responded, the last time being in February. The company has assets and as such should probably be wound up (liquidated). I recommend talking to an insolvency practitioner.