As the turbulent economy has taken its toll on UK businesses, owner managers have found themselves facing evermore challenging decisions. On the one hand, they want to remain positive through the current turmoil. On the other, the financial realities of their business are creating uncertainty of how to move forward. Together, this predicament has left owner managers in limbo and avoiding taking decisive action to save their business.
Unfortunately, this indecisiveness can be increasingly damaging for a business’s prospects and can also result in detrimental personal circumstances for an owner manager. So, where does this hesitancy come from and what can the consequences of it be?
Could more Government support be on the way?
Covid has changed the psychology of business owners. Over the pandemic, the Government provided over £69bn in support measures for UK businesses in the form of grants, loans and tax cuts. But the pandemic was by no means where a business’s troubles ended. Brexit, the war in Ukraine,high inflation and interest rates at a 20 year high have continued to impact both finances and operations. With the current economic climate continuing, some owner managers may believe more government support is coming their way. The reality is that this is very unlikely given the current Government’s attempts to reduce borrowing and weather the rising cost of public spending.
However, this does not mean there is no support out there for owner managers. Specialist business advice and funding options for distressed businesses are available. But the owner manager needs to be proactive in seeking it out.
The personal cost of hesitancy
While investment is necessary for continued growth, this is not the same as continuing to borrow to prop up a failing business. In fact, such action is likely to leave business owners and directors in a precarious personal situation.
Many funding options require owner managers to give a personal guarantee to the loan, which binds their personal assets to their business’s success or failure. If a business is already distressed, funding is unlikely to resolve the problem on its own. A comprehensive business rescue plan is required, or it may be that restructuring the business by starting afresh is the best option. Either way, the last thing a business owner would want is to risk their home and livelihood.
Overcoming the mental obstacle of business insolvency
Business owners have put their heart and soul into their business and are committed to seeing it succeed. But the unfortunate fact is that in the current economy business failures are increasing. No one can be sure what is coming around the corner, which can leave owner managers on the fence about whether they should engage an Insolvency Practitioner or carry on a little longer. While the latter may feel safe, the reality is the further a business decline goes, the fewer options there will be available to save the business, or retrieve its worth through a formal insolvency process.
The sooner you act, the better the outcome
With economic uncertainties unlikely to abate any time soon, owner managers need to act decisively on the facts of their business today. This can be unnerving, but the bottom line is inaction could cost you your home, your livelihood and your business. Getting an objective view on your business situation from a business rescue specialist can be invaluable at this time, while also giving you the breathing space and support to come to some tough decisions.
We will work with you to find the best way forward, whether that is business rescue advice, financing, creditor arrangements, debt management, or formal insolvency options. Acting now will open up your business potential for the future.
How we can help
We have extensive experience advising business owners, and we will always work with you to find the best solution for you and your business.
One of our Partners would be more than happy to have a non-obligatory confidential chat with you. We can be contacted at email@example.com or call us on 020 3326 6454 and we will arrange for a call with one of our Partners.
This article was written by Restructuring and Insolvency specialist, Steve Parker, Partner at Opus.