Get best advice early on if you want to survive

OVER the years, insolvency practitioners have had a bad name for being little more than corporate undertakers — so they rebranded themselves and became business recovery professionals. In reality, trying to save businesses is what we have always done and now, more than ever, there is scope for saving any business with financial difficulties.

The road to formal insolvency is often quite long and the first warning signs occur months or sometimes years before the final demise.

On the other hand, a significant bad debt or other catastrophe may herald the almost-immediate failure of a business. The difficulty for any director or proprietor of a business is knowing when he needs to get proper professional advice.

If proper advice is sought in the early stages, more options are available and the greater the chance that the company or business can be saved.

Taking early advice also reduces the possibility of, perhaps innocently, committing one of the many insolvency offences, such as repaying the director's loan account or paying one creditor off in preference to another.

There is also the offence of wrongful trading, where a director may be personally liable if continued trading results in greater eventual losses to the creditors.

For a director to lose his company — and possibly his home if personal guarantees are involved — is one thing, but the effect becomes so much worse if he or she is then subject to legal action by the liquidator or administrator trying to recover money for the company's creditors.

From a personal point of view, one frustrating situation that occurs frequently is when I am called in by a bank or creditor to see if anything can be done to save a business, only to find that the director has remortgaged his house, perhaps using the last bit of equity, to pay off a pressing creditor when there is nothing left of the company to save and liquidation is the only alternative.

Once a company has been trading successfully for a number of years, the chances are that there is a good business to save if it is caught at the right time. The right advice can lead to procedures that can stop creditors taking action until the company is back on its feet. It can help find additional funding, enable the sale of the business to save jobs and maximise the return to creditors or setting up a new company that can take over the business from the old company — perhaps by using the same funds that were available to the director when he remortgaged his house! The possibilities are endless — as long as the proper advice is obtained early on.

If the director leaves it too late, compulsory liquidation and possibly personal bankruptcy are the only alternatives.

Where to turn to for this advice? It has to be the insolvency practitioner. Over the years, I have seen very bad insolvency advice given by otherwise very reputable professionals. Due to the specialist nature of the advice that is required, you have to see the specialist who knows precisely what the alternatives are and the right advice to give.

And the best bit? It needn't cost you a penny! Any reputable insolvency practitioner will be far more concerned about giving the right advice at the beginning.

Of course, fees will have to be paid in due course but it is often a small price to pay if that advice leads to the survival of the business.

If your business is having financial difficulties, you can't afford not to get that proper advice — before it's too late.