What are our next steps? Insolvent Hospitality business being propped up by our other business

[Hospitalitysux]

Hi Folks,

We've had a very difficult few years. We operate in a Seaside town which like a lot of towns has had a big decline in the high st. We own two businesses in the Town centre, One has been open for 5 years and the other we opened 2023. Neither has turned a profit. In fact for the last 5 years we've been propping it up with funds from our successful business. In 2023 another business went into VL and we decided to also take on that site in the hope that a different offering may help support the other business.

We had an ok first few months, It was a new concept for the town so was a bit of a slow burner at first but is now going well (although not profitable every month yet)

Then July happened! ( Its been all over the News so no need to go into detail here) This has had a massive impact on the town and our businesses which were very close to the memorial site. Thousands of people paying their respects but obviously not wanting to hang around. We've kept going but its cost about £200k (money from another business)
Were behind with PAYE, VAT and Rent. Our other company is now also behind with VAT, (we are under a payment scheme but were no longer able to pay the VAT bills going forward so will need to add to our payment plan)

The town is going through an series of regeneration projects but I just dont think we can survive long enough to see it.



We Lease 3 sites in the town centre (local council owned). One of which had to close after 3 months of trading (5 years ago) due to flooding, Its underground and rain water run off from the local council buildings was somehow connected to our ventilation system. The Council have finally fixed that issue but 5 years of water ingress has ruined the building so it need a total renovation. But we can no longer afford to get that ball rolling to start compensation talks with the council.

It seems we've been spinning plates and they are all starting to come crashing down, And our successful business is now suffering!!

 

[Hospitalitysux]

To add. Our successful LTD business has just won a 4 year tender (contracts not signed yet) so we dont want to do anything that may jeopardise that

All businesses are LTD

 

[Lisa Thomas]

Hello

Sorry to hear about all your difficulties.

I believe you should really speak to an insolvency practitioner to explore the options available. I'd be happy to have a chat with you.

My initial chat is free, confidential and non obligational.

Feel free to dm me to set up an appointment.

 

[ChrisCallaghan]

Hi @Hospitalitysux ,

I'm sorry to hear about the difficulties you've faced. I see @Lisa Thomas has already offered to provide you advice, and I would agree with her comment, that now would be a sensible time to take insolvency advice.

I am also happy to throw my hat in and offer fee advice and an exploration of the options available at this time. You can reach out to me through a direct message on this site, or through my details in this post's signature.

 

[Hospitalitysux]

Thanks for the replies, Were currently making sure our accounts are up to date and have a full current list of liabilities. Despite putting in the best part of £250k in the business over the 12 months we still owe almost £120k with £75k Being PAYE...
We've a couple of equipment purchases that we are PG for which isn't ideal but amounts to about £1000 PM until 2026

 

[ChrisCallaghan]

Thanks for the replies, Were currently making sure our accounts are up to date and have a full current list of liabilities. Despite putting in the best part of £250k in the business over the 12 months we still owe almost £120k with £75k Being PAYE...
We've a couple of equipment purchases that we are PG for which isn't ideal but amounts to about £1000 PM until 2026

For insolvency advisors like myself or @Lisa Thomas , the more info you have for a consultation is always appreciated and helps us in guiding you on your options, however in our profession we are always happy to give advice early based on the information you already have to hand, and then continue advising as you gather more accurate information.

 

[Paul Kelly ICHYB]

Are the local council able to offer help? Other businesses will have been affected, so they must have a plan in place?

Speak to the Economic Development/Business Support team.

 

[Hospitalitysux]

Another quick question if I may.
We are PG's for a couple of pieces of equipment. Not massive amounts A Rijo42 Coffee machine and a Pizza oven and a big Dough mixer about £1000 PM.

What normally happens with them Do they get separated or do they get sold and put in the big pot but were still personally liable until "paid off".

 

[ChrisCallaghan]

It depends on what you are wishing to do. If you are closing, possibly through a liquidation, and have no plans to continue with that particular business, it would ultimately be up to the finance company. Normally they would go back and you'd be liable for any shortfall between their value and the amounts outstanding.

 

[Newchodge]

I am sorry to hear about your difficulties. I am afraid the answer is probably quite simple. Concentrate on the succesful business(es) and let the others go, with advice from the IPs on here.

In talking to them, please be very aware to give them, specifically, all the information you have. For example your post says

Then July happened! ( Its been all over the News so no need to go into detail here) This has had a massive impact on the town and our businesses which were very close to the memorial site. Thousands of people paying their respects but obviously not wanting to hang around. We've kept going but its cost about £200k (money from another business)

I am afraid that I haven't the faintest idea what this is about and I am also sure that I don't need to know. I am sure it is something that had an enormous impact, but please don't assume that everyone is working from the same knowledge base as you. When seeking advice you need to give clear and unambiguous information.

 

[Hospitalitysux]

I am sorry to hear about your difficulties. I am afraid the answer is probably quite simple. Concentrate on the succesful business(es) and let the others go, with advice from the IPs on here.

In talking to them, please be very aware to give them, specifically, all the information you have. For example your post says

I am afraid that I haven't the faintest idea what this is about and I am also sure that I don't need to know. I am sure it is something that had an enormous impact, but please don't assume that everyone is working from the same knowledge base as you. When seeking advice you need to give clear and unambiguous information.

Thanks, We will be open and transparent
What happened 29th July has been all over the news and had a wider effect across the country in smaller localised areas.

 

[Talktime]

If the businesses were to enter a formal insolvency process, such as a Company Voluntary Arrangement (CVA) or Creditors’ Voluntary Liquidation (CVL), the treatment of personally guaranteed (PG) equipment would depend on the agreements in place with the finance providers.

In most cases, equipment under finance agreements remains the property of the lender until fully paid. If the businesses go into liquidation, the finance provider would typically repossess the equipment rather than it being sold as part of the general asset pool. However, because there are personal guarantees attached, if the businesses are unable to continue payments, the finance provider could pursue you personally for the outstanding amounts.

In a liquidation, the liquidator would assess whether continuing payments on the equipment is feasible or whether surrendering it is the best course of action. If the equipment is sold as part of the liquidation process, any shortfall in the finance agreement would still be payable by you under the personal guarantees. It may be possible to negotiate with the finance provider to restructure the repayment terms or settle the outstanding balance to reduce your exposure.

If the businesses remain trading under a restructuring arrangement, such as a CVA, you may be able to continue using the equipment by maintaining the agreed payments. It is important to review the finance agreements to understand whether they are secured directly against the equipment or if they are simply credit agreements backed by personal guarantees, as this can impact how they are treated in an insolvency situation.

If the businesses are still viable and you wish to continue trading, early discussions with the finance providers could help secure better terms or prevent the equipment from being repossessed, particularly if the successful business relies on it.

 

[Newchodge]

Hello,

I'm so sorry to hear this, like other people have said it may be best to drop your other business and focus on the successful business. However, you may have a chance of saving your business that's declining if you relocate to an area (near by but maybe less costal) that has the cliental you require if you don't want to close down the business. If that's not an option to relocate, you could potentially find someone to merge your company with if you have something they are missing/need (if that be an office, experience, etc). One way to help save money in your successful business (before it starts to decline because of the loans to your other business) is by using a payroll services as you would use their PAYE code, which can save you up to 15% in tax. Especially as you're already behind in your PAYE payments this might be something too look into.

Please could you explain how using a payroll service can save you 15% in tax?