Is my Company Becoming Insolvent?

As an insolvent business is one which cannot afford to pay its own debts, it does not necessarily mean that your business is not profitable. If you are worried about your business becoming insolvent, you will want to look at some of warning signs which come with insolvency before it gets too late. Take a look at some of the signs to be aware of which most insolvent companies go through and use our two key tests to identify whether your business may need to take quick action to avoid any further problems.

What are the warning signs of insolvency?

There are few more obvious signs than others which suggest your business could be insolvent or may be becoming insolvent. If you match any of these warning signs, you will want to have a look at the solutions we have to offer.

Insolvency Warning Signs:

• You have a Court summons or judgement coming up soon
• You have recently had visits from Sheriffs or bailiffs
• Your company has been presented with a statutory demand or winding up petition
• You have negotiated a deal with the Crown but been unable to follow it through
• You are often chased up by creditors for payments
• You are unable to get new credit or even extend existing credit
• Your bank refuses to extend your old limit
• The promises you made to clients have been broken

Here are two tests to identify if you are already insolvent:

If you fail any of these two tests, you will want to think quickly about what your next actions are:

1. Your business cannot pay its debts as and when they become due. This means you are regularly late at making payments or may have even missed a payment of debt entirely.

2. The balance sheet test can be used as a strong sign of insolvency. If you have more liabilities than assets it is likely you are currently insolvent.

Now, it is your responsibility to make a decision about the future of your business. You will want to decide whether to stop trading or not as you could be personally liable for any future company losses, and further trade will likely only hinder the chances of avoiding liquidation.

At this time, you are ready to consider what further action to take if you want to either dissolve the company smoothly or, if you want to keep your company alive and bring it back to full health. This is where the work of Business Recovery can help as we have the experience with sourcing you new finance methods to improve your cashflow and get your business on track again. Help us to help you by calling us now on 01451 832533.

About the Author

Mark Jefferson is a seasoned commercial finance professional with over 25 years’ experience in financial services, much of that spent providing funding to SMEs. Mark has worked with many other firms in a similar situation to yours. Call Mark on 01451 832533 and you can also follow him on Google+

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