Cash flow difficulties are often a warning sign that a company is under financial pressure. Addressing these issues early can help avoid formal insolvency and preserve the business. Options available include both informal measures and formal restructuring processes:
1. Negotiate with Creditors
Companies can seek extended payment terms from their creditors, allowing more time to raise funds for repayment.
2. Explore Informal Funding Options
The company may consider obtaining short-term loans or capital injections to improve liquidity. However, this should be approached cautiously. Taking on additional debt without a clear and realistic repayment plan could worsen financial difficulties and increase the risk of insolvency.
3. Consider Formal Restructuring Procedures
If informal options are insufficient, formal procedures such as a Company Voluntary Arrangement (CVA), moratorium, or administration may be necessary. These processes can provide structured solutions to manage debts and potentially rescue the business.
4. Seek Professional Advice Early
If the company is experiencing severe financial distress, it is important to contact a licensed insolvency practitioner. They can offer expert guidance, explain all available options, and help determine the most appropriate course of action, including the possibility of liquidation or administration.
