Sole Traders Trade Sale Guide

“We’re running out of cash, why don’t we see if someone will buy the business”?

These are often heard comments from our advisors and turnaround team from sole traders. Sometimes people think that someone will buy the business out and the problems will be quickly solved. In our experience that’s simply not the case.

If your soletradership is insolvent; but you are not yet in IVA or bankruptcy.

So you are running out of cash, pressure is mounting and creditors becoming aggressive. Trade sale may seem to be an option. These are some of the reasons why a quick trade sale when the you are insolvent don’t happen very often!

• Buying a sole tradership’s business is very difficult when it’s insolvent. That’s because separating personal liability and business liability is sometimes virtually impossible.
• If they can get past that issue then buyers will want to know all about the cashflow problems, assets liabilities, markets, order book, customers, debtors & creditors, staff, management and the plans for the business
• This is called “due diligence”, most buyers walk away because due diligence fails to satisfy the requirements to avoid RISK.
• Buyers don’t want to take on the debt from the banks and unsecured debt
• Most sellers have far too high a value in mind for their business
• Many sellers won’t give “warranties and guarantees” to the buyer because of RISK
• There are outstanding legal actions = RISK
• Banks may worry about loss of control and your procrastination, they may take action to close or freeze your bank account to avoid that RISK
• Finally all of the above due diligence processes can take several months to complete. You may run out of cash and time by then.

Talk to a KSA director about this complex set of issues.

If you still feel a trade sale is a good option or IVA sale is an ideal way ahead, call us now.