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Archive for the ‘Business Debt’ Category

Credit easing and the possibility of recession

Monday, November 28th, 2011

It is impossible to tell what the future holds for the struggling British economy. The Chancellor George Osborne has announced a policy of credit easing. In a few months, this measure might begin to make a positive difference to the situation. Other measures like the freeze in council tax might permit consumers to spend more. However, much depends on the implementation of the credit easing plan and on external economic conditions.

At Cooper Matthews, we know just how hard the economic climate is out there. Whether or not the credit easing is well thought out, it is quite possible that a double-dip recession may occur. The growth forecasts have been revised downwards on several occasions and the international economy is in an awkward patch. It has become routine to maintain that there is a leadership deficit affecting the United States, the Euro area and Japan.

In these difficult conditions, the number of distressed companies is likely to increase, whether or not the economy officially enters recession again. Business debt is seldom caused by the actions of firms because it normally reflects external conditions. However, if a company is suffering from severe company debt problems it does not mean that it should give up. If its directors act swiftly and appropriately the company’s future may well be saved.

A professional insolvency practitioner has the experience and expertise to assist a company in considerable difficulty. A company cash flow problem need not mean that there are not diverse solutions out there to be explored and implemented.

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The Merlin Agreement might not work for all

Friday, November 25th, 2011

The Bank of England has announced that the price of credit for small firms might increase in the final months of 2011. The coalition government’s Merlin Agreement with the banks does not appear to be working for firms of all sizes. Some banks are allegedly making lending decisions on a sector-based basis, instead of looking at the specific context facing the individual enterprise. The banks have confessed that they might not reach their target for lending to small businesses.

At Cooper Matthews we know that the lack of accessible and affordable credit for small businesses can have a significant detrimental impact upon their chances of making progress. Coupled with an unhelpful economic climate, it can make it harder for good businesses to make sustainable profits. If credit is obtained in today’s environment, it may be done in such a way that personal debt issues are made worse if things should go wrong.

It is common for small firms to need every opportunity they can get. If events turn against them, it is imperative that they obtain accurate advice fast. Business debt services can be of significant assistance in dealing with creditors. However, if an organisation does collapse then the directors may need help with personal financial problems.

Director finance advice is essential to minimise the damage incurred to the personal financial status of a director. In most cases, avoiding bankruptcy makes a great deal of sense. Business director debt can be dealt with, but it should be remembered that the issues are more complicated than those involved in sorting out debts derived from personal expenditure exceeding income.

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An example of how to handle business debt

Tuesday, November 22nd, 2011

Amid all the headlines about worrying economic news, there has been a story which has shown how swift, correct decision-making can help firms which are suffering in current economic conditions. Alexon, a fashion group which employs around 2700 staff, has been taken over by a private equity firm.

At Cooper Matthews we know that many companies on the brink of collapse have the capacity to be efficient concerns if the right measures are adopted. Struggling businesses can have happier futures if they get the chance they deserve.

Alexon had been struggling for over sixth months. It had issued three warnings with regard to profit levels in the period before the takeover. Its business financial difficulty was such that it would have been unable to afford the rent due for its shops. As the end of September neared, its shares were finally suspended. The severity of its problems was underlined by the fact that it had debts which were almost 9 million pounds higher than its market worth of around 4 million pounds.

The company was saved using pre-pack administration. This method will not be appropriate for every struggling organisation – when trying to deal with debts accumulated through business activity, ‘one size does not fit all.’ Experienced practitioners must look at each company on a case-by-case basis.

Nobody can predict what the future holds for Alexon. This is true for every enterprise which receives a second chance. Nonetheless, the example of Alexon does indicate how foolish giving up actually is.

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Do not mix debt with denial

Saturday, November 19th, 2011

When a business is not going well, certain types of psychological reaction are all too common. Some individuals push themselves ever harder. This can lead to excessive stress and diminishing returns from effort. Other individuals keep plugging away at their tasks, simply hoping that good fortune will come to their rescue. Neither of these approaches is to be recommended.

At Cooper Matthews our experience tells us that few businesses fold because of a lack of effort. Furthermore, we know that repeating the same activities and expecting different outcomes can be a recipe for disaster. If a business is becoming saddled with debts, it is time to seek guidance and come up with fresh strategies.

Business debt analysis is far from simple. It is easier for individuals who are not operating within the firm to get a good grasp of the situation. When one has invested the work of years in an enterprise, it is not so easy to step back and do all the complex calculations. Nor is it straightforward to select the right options.

On occasion, a time to pay arrangement may be the best way out of a difficult situation. In other instances, alternative exits from company debt problems may be more prudent ways forward. There is little to be gained from trying to struggle with the complexities concerned while trying to get on with the day-to-day running of the operation. By getting the right advice within the right timeframe, it is feasible to get things back to where they should be.

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Survival in an era of austerity

Wednesday, November 16th, 2011

While much of the media has understandably focused on the severe problems affecting the Greek economy, the situation in Italy has become very serious also. Austerity policies have not helped economic performance in Greece and it remains unclear how they will impact on Italy. In August, a letter from the European Central Bank instructed Italy that it needed to introduce radical changes swiftly. The response of the government of Prime Minister Silvio Berlusconi was prompt but not comprehensive.

At Cooper Matthews we know that many economies in Europe are struggling and perceive the interdependence of the fortunes of countries in and outside the troubled Euro area. The pound has not strengthened against the Euro precisely because the British dependence on trade with its neighbours makes it vulnerable.

When economies are not performing at full throttle, an ordinary SME can find survival difficult. Access to credit may be problematic. Product demand can be unreliable. The fluctuating fortunes of other companies in a cluster, supply chain or network can cause significant disruption. The lack of confidence in the economic climate can have a wide range of unfortunate effects.

If a business becomes distressed, it is crucial to realise that a company debt rescue is not out of the question. An experienced insolvency practitioner should be contacted quickly to assess the difficulties. It is frequently possible to avoid a creditor getting a winding up petition. It is the case that a complete company recovery can often be worked towards.

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Major weaknesses in the European economy

Sunday, November 13th, 2011

Since the financial crisis has entered a new chapter, it is clear that there will be no swift return to business as usual even if things go well. The sovereign debt crisis in the Euro area has taken a dangerous turn. Not only is there potential for a fresh banking crisis, but there is also the fact that the poorer states do not appear to be coping well with addressing their own sovereign debt problems independently.

At Cooper Matthews, we recognise that British firms are not insulated from international problems. The Euro area is obviously a major market for British exports. There is a lack of demand for British goods and services at home and abroad. The widespread economic gloom is affecting a diversity of companies, not just those who look to export to mainland Europe. A new wave of the banking crisis would have a destabilising and unpredictable impact.

In a context like this, it is not unusual for a business to acquire debts. With lots of organisations shedding jobs, a variety of small companies are finding it hard to sell their products or services. Business debt can rise swiftly in times like these.

Even though a business cash flow problem may be serious, it is important for everyone concerned to remain as positive as possible. Advice from experts should be sought without delay. It is vital to remember that the future is uncertain and that there is nothing inevitable about company liquidation.

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Personal debt can be a troubling problem

Thursday, November 10th, 2011

These days, personal debt issues are commonplace. Just because someone is a company director does not mean they will not be part of this wider trend. However, a company director may well have used loans to support their business in its infancy. This might not be a problem in good times, but if the business gets into serious financial difficulty it could well prove to be a very serious matter.

At Cooper Matthews we admire individuals who are willing to take risks to make a success of their entrepreneurial activities. However, if these entrepreneurial activities do not succeed then the risks taken may come back to haunt indebted directors. Due to the fact that there will be a complexity in the situation, beyond the capacity of an ordinary debt specialist to deal with, we know it makes commercial sense to use high quality business debt services.

Director business debt can feel very unfair. When one has worked so hard to build a dream, facing up to it can be painful. Nonetheless, to avoid worst case scenarios, it is critical to deal with it promptly. A range of options with different strengths and weaknesses need to be reflected on. These include things like an Individual Voluntary Agreement and bankruptcy.

Bankruptcy can preclude someone from being a director in the future and it should be viewed as a last resort. Director finance advice can be used to weigh up the benefits and drawbacks of bankruptcy and the available alternatives. Many successful directors have had personal debt problems in the past.

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UK not keen on European tax on financial transactions

Monday, November 7th, 2011

In September, the Bank of England made clear that British banks should take any possible steps to strengthen their position in terms of capital. It also asked the Treasury to ensure that the City maintained as much autonomy as feasible in these dangerous economic times. However, as part of the European Commission’s efforts to push for solutions to the sovereign debt crisis within the Euro zone, it has recommended that there should be a Europe-wide tax on financial transactions. Those responsible for the British economy do not wish to sign up to anything which might adversely affect the international competitiveness of the City.

At Cooper Matthews we are conscious of the fact that many businesses have become virtual bystanders as economic problems are being addressed at a higher level. The trouble is that there has been no coherence in the response of those in charge of the European economy. Hence plenty of good companies are finding this prolonged period of crisis to be a very difficult trading context.

When consumer spending is depressed due to a combination of household debt and high inflation, many enterprises are seeing business debt rise. Sometimes the level of debt is below the value of the assets of the company, but this is not always the case. It is necessary to get an expert to disentangle the financial affairs involved.

It is not the case that a business cash flow problem inevitably spells disaster. In some circumstances, a phoenix business can be formed to make use of the same assets and staff to make profits in the future.

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Household disposable income decreases

Friday, November 4th, 2011

According to statistics gathered by Asda over the summer, the average UK family has suffered from a significant drop decline in their capacity to spend. The Chief Executive of Asda, Andy Clarke, has made clear that in his view British families are experiencing a collapse in their living standards without recent precedent. The survey stated that average disposable income was almost 8 per cent lower than the year before.

At Cooper Matthews we are conscious of the fact that less household spending will be disastrous for a variety of good businesses. However, we are also aware that less difficult conditions may develop in 2012. The Centre for Economics and Business Research has mentioned the fact that inflation will probably decline next year. Hence companies should do everything possible to soldier on.

The debts which a company can run up are frequently of a complex nature. They are invariably harder to manage than the debt problems of an individual. It is imperative for an experienced practitioner to engage in thorough business debt analysis. They can chart the extent of the problems and calculate the best way of moving forward by weighing up the diverse options.

In current economic conditions, a small firm is more prone to accumulating debt. A large supplier may go bust or customers may simply be thin on the ground. However, a company financial difficulty need not kill off the prospects of a revival. If the appropriate steps are taken with sufficient care, a company recovery may well be possible.

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European economic instability continues

Tuesday, November 1st, 2011

While the economic crisis has been affecting business activity on a global scale, it has had a particularly significant impact within the boundaries of the Euro zone. Even if political elites manage to get to grips with the sovereign debt problems of southern Europe, the influence they have had has been severe and wide. Several countries outside the Euro have been experiencing stagnation, which is in part the consequence of the collective failure to respond swiftly and successfully to the danger of a second banking crisis.

At Cooper Matthews we appreciate that the problems facing British business are not all home-grown. Particularly since the collapse of Lehman Brothers, the British economy has been adversely affected by difficulties connected with events often beyond the control of the government and the Bank of England. The consequence has been a collapse in consumer spending.

The British consumer’s capacity to spend has been reduced by inflation that has been persistently above the 2 per cent target. The Consumer Price Index measure has often been twice this. Meanwhile, growth has disappointed and unemployment has mounted. In these circumstances, business debt services have been obliged to help a diversity of struggling firms.

A business financial difficulty can arise very quickly in difficult economic times. However, there is nothing to be gained from abandoning a positive mind set. Many ultimately successful firms have endured periods of serious difficulty. It is worth consulting experts to ensure that a tricky period of trading does not lead to a winding up petition.

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