Published: 26/06/2024 By Andrew Bailey
When providing advice do insolvency practitioners consider "informal solutions" or do we look to apply a formal process like a Liquidation, Administration, voluntary arrangement, etc without considering anything else?The answer is that we look at all options including informal routes and we will tell people if they don’t need our services if there are those better placed to help them.
As a bit of a case study to try and explain this I received a referral from a bank manager recently. He had been approached by a potential customer as they were looking to switch banks but from the initial review the bank could not accommodate them and they were showing early signs of distress.
He introduced me and I was pleased that the business owner took the opportunity to take advice. The customer was a lovely man who cared deeply about his business. We talked through the history, the challenges they had faced and then the current performance and balance sheet.
When the business started to struggle he borrowed money quickly without doing too much market testing. It was now costing a lot of money in interest. I see this regularly and I can understand how it happens. It is too easy to sit in your ivory tower and criticise but when under pressure to pay bills, wages, etc then you can understand why quickly taking out a loan is an attractive option. However, it is important to consider the longer term consequences of taking out these loans.
He also engaged an agent to look for purchasers and investors but the agent had not been successful as he may not have been the best fit in the circumstances. Not unreasonable steps at all but with him juggling the day job as well as dealing with the financial challenges it was all becoming too much.
I was pleased to say to him that I didn’t think he needed my services.
However, I suggested he make use of my contacts who I felt could help him with re-financing to reduce costs and who may also be able to attract equity investment which was something he was actively pursuing. We also looked at whether he may need support internally with financial reporting to alleviate some of the pressure on him.
He agreed and I am confident he will not speak to me again for insolvency advice.
Of course, when I introduce my contacts it helps my own relationships with those contacts but the important thing for me is that I trust the people I introduce implicitly. I know they will not take shortcuts or prioritise their own interests for a fee. The client will get value for money and I know they will do their best for him.
It is just an example of where we can help. As a profession we do have a good toolkit to help businesses and this includes bringing in support from elsewhere if that is needed.