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Sole trader – Trading Out

14th April, 2020
Keith Steven

Written ByKeith Steven

Managing Director

07879 555349

Keith is the author of the content on this comprehensive rescue, turnaround and insolvency website. He is the managing director of KSA Group Ltd - a specialist firm of turnaround and licensed insolvency practitioners. Keith was nominated for Turnaround Practitioner of the Year 2014 at the National Insolvency and Rescue Awards in 2014.

Keith Steven
  • A key element of this policy is honesty.
  • “Informal” deal:
  • “Formal” deal:
  • New Finance allied to informal deal
  • Tips
  • Still got questions? then click here for Trading Out FAQs

Useful links for this page – FAQs

Isnt it the most straightforward way of dealing with a cashflow problem?

If the business has suffered a downturn in circumstances because of a finite set of issues and the business is not fundamentally weakened, then yes. Including the largest companies, every business faces a cyclic cashflow problem. Measurement of success cannot be short term, but events dictate that every business will suffer at times, witness firms like the top retailers and top telecoms companies recently.

If you have been through warning signs, establishing insolvency and dos and dont’s and you think your business is not that distressed then look at this option.

A key element of this policy is honesty.

Be honest with yourself, the employees, your creditors and your customers. Without this there is real risk that you will only make the current problems worse.

It is important that you carefully and honestly consider the problems facing the business. Ask yourself the following questions and gauge the answers:

  1. Is this business viable? If you could remove the problems or the pressure does it have a real long term future?
  2. Is money all it needs to sort the problems?
  3. Can you achieve sufficient sales, activity or momentum to cover your costs? We call this critical mass.
  4. Have you cut all costs to the minimum efficient level?
  5. Can you maintain the key people you need?
  6. Are you able to produce your service or product at a price that the market can sustain?
  7. Would it be better to close the business and look at other opportunities?
  8. Have you got the fight in you to keep battling on without support?
  9. Have you taken advice from professionals?
  10. Have you involved the key partners in your business?
  11. Are you fearful of taking decisions to close, restructure or sell the business and are seeking to trade out to avoid the personal ramifications of closure – such as bankruptcy?
  12. If your activity does rise can you:
  • a) Fund it – working capital problems are just as acute for too many sales as too few
  • b) Produce it – if your creditors will not supply will you be able to deliver sales
  • c) Justify any further credit you may have to take – is there a reasonable prospect of repaying that credit.

If you now believe that the business HAS a future and that the problems are not insurmountable then read on.

Trading out can be a very effective tool if handled correctly. There are a number of ways to do this. The key is to achieve a breathing space for the company.

“Informal” deal:

Merely calling the key creditors, explaining the position: you want to pay them back in full as fast as possible but cashflow is tight and can you pay them over an affordable timeframe, can work wonders. BUT do not do this without a planned approach. You must

  1. Work out your cashflow – be realistic. If a debtor is due to pay in 30 days check whether they are happy with the invoice and goods, check when they think they will pay. Then add on 10 days at least.
  2. Build a daily cashflow, if you cannot write spreadsheets use a simple form on a sheet of paper, but update every figure as you go.
  3. Not over promise. If it looks like you can pay all key creditors in 30-60 days ask for 60-90 days. Creditors will usually be happy to work with you if you are honest.
  4. Not break deals. But if it is unavoidable, write and call the creditors and explain carefully where the plan has not worked.

“Formal” deal:

This is not a formal insolvency deal such as a IVA. But the use of a professional turnaround practitioner can ensure that the “honest broker” effect achieves workable deal. Once again the deal broker will want to see evidence that the sole trader has planned their recovery and looked long and hard at the business and its cashflow. Some creditors may even accept write-downs of debt if they think the business will survive and prosper long term.

If you want to be introduced to such a service please email us.

New Finance allied to informal deal

As this suggests, the introduction of new money to the company at a time when you are seeking to do a deal with creditors can be a very strong sign that you are serious about the business’ future. See refinancing for further details


Don’t wait until legal actions have been taken against the company to ask for a deal. Try to plan the cashflow of the business well in advance – you have a legal obligation to do this! If you think the business has enough cash to trade they should consider the options and plan a way forward. Once again go to using the site and follow the advice. Worried about legal actions? go to that page for more details.

Keep a log of all calls and letters to creditors – that way you can check back.

Have a review meeting each week – if you are falling behind take action.

If the plan is clearly not working consider the other options on this site.

Don’t wait too long to get professional turnaround help. Often an IVA can remove the stress and allow you to get back to running the business, not the deals with creditors.

Still got questions? then click here for Trading Out FAQs

Trading Out – frequently asked questions has much more information – if you consider this to be appropriate then read this page. If there are still unanswered questions contact us by email .

Worried Director What Will Happen To Me After Liquidation?

in Company Liquidation What is …?

"A man in the pub said I cannot be a director of any other company if I liquidate my company. Is this true?"Actually, this statement is entirely false! Misconceptions like this frequently arise from individuals with limited understanding of the subject matter. Such misinformation can cause undue anxiety for directors considering liquidation, fearing it might personally affect them. Guess what? Listening to bar room experts, inexperienced accountants, or no insolvency specialist lawyers can stop decisions being made, this failure to make a decision is really what could land you in trouble. So how will liquidation affect me and how long does it take? Having a limited liability company means that the directors have little risk (or limited liability) if the company fails, as long as they have acted properly and acted in time. What is more, if as a director, you have been compliant and on the payroll for many years, you can actually claim redundancy from the government like any other employee. But, and it is a big but, if you fail to act in time, fail to act reasonably, fail to keep books and records, continue taking credit KNOWING that the company cannot possibly repay it, then you ARE at risk of personal financial loss or worse such as losing your house. So, act now and get help for your company and more importantly start reducing your own risks.Voluntary liquidation is the quickest most efficient way to deal with an insolvent company that has no future. As a director of an insolvent company, you are at risk if you do not act. This risk RISES the longer you don't act to put the company into liquidation.If you fail to act and the company is wound up by the creditors (compulsory liquidation) then the Official Receiver (OR) will be appointed to liquidate the business and he or she will investigate the activity of the directors and the business over the last 2-3 years. This is known as a conduct report on each director.  If the OR can prove there was wrongful trading where, for instance, you have taken credit from a supplier or took deposits from customers when you knew that it was highly unlikely that you could pay them back, then you could be made personally liable.This is known as the "lifting of the veil of incorporation" that protects directors under limited liability. If this happens then you could made liable for PAYE, VAT and creditors monies from the time that you should have known the company had no reasonable prospect of surviving the problems it faced.Additionally, the directors may face disqualification proceedings under the Company Directors Disqualification Act 1986 for up to 15 years, they can be fined and may face the loss of personal assets like your home, or even personal bankruptcy.Look, if you as directors have acted naively you may not know that you have broken these laws, but now you do know, it is vital to ensure that you protect yourself as a director by acting quickly to cease trading and put the company into voluntary liquidation; or consider a company voluntary arrangement if the company is VIABLE if the problems are solved. What is Creditors Voluntary Liquidation and what does it mean for me? In short, liquidation usually means, the company's trading stops and it's assets are turned into cash or "liquidated".All other possible liabilities, like employment liabilities, landlord's rent or payments to lease companies are stopped. It really is the end of the company, but the "business" may survive if a phoenix is organised. Liquidation is a powerful way to END creditor pressure and let you get on with your life. What if I have signed personal guarantees? If you have signed personal guarantees or indemnities to lenders, then the liquidation could lead to them being called in if the bank cannot get its money back from the company. There is little that can be done about that, but you should not delay decisions on liquidation to try and prevent a PG being called in: just think what ALL of the company's debts landing on your shoulders would do. Also it should be noted that HMRC now rank ahead of floating charge holders in any liquidation since December 2020.  Consequently, this may well mean that lenders that you have personally guaranteed will get less recovery hence exposing you more.All banks will agree a deal to repay the PG over time - provided you work with the bank to reduce their exposure.One great piece of FREE advice - always make sure that ALL tax returns, VAT returns and annual returns have been completed and sent in and that other "compliance" issues are dealt with wherever possible. These are important processes and will help protect you as individual directors. It shows that you have been acting properly.  I have heard about directors being able to claim redundancy in liquidation If you have been employed by the company and made payments via PAYE then you will be able to claim redundancy from the government and this is in fact a very simple process (20 minutes to fill out a form and we can help with that) so there is no need really to employ a third party to make a claim.  This process has been open to fraud so the HMRC are cracking down on operators that claim to be able to get money back when there is not enough "paperwork".  It isn't worth the risk.  If it sounds too good to be true then it probably is!You need to learn more about the options. This is clearly a general guide so, if you have any worries at all, please, just call us and we will talk you through the situation free and with expert guidance for your situation. Call one of our advisors or if you prefer, call our IPs (insolvency practitioners) now:Just one CALL will help relieve the stress and get you out of the mess.Why not call 08009700539 or 020 7887 2667 now?We could help you start the liquidation process today.(8.15am till 5.00pm; Out of hours call on 07833 240747, Wayne Harrison (IP)  or Eric Walls (IP) on 07787 278527)Finally, please remember this: NO BUSINESS is worth losing your health, relationships, marriages or your children over. Act properly, take advice, get the problem sorted and then get on with your life. In a little while the stress will go and you can focus on other things that are more important.Want more information on liquidation? Get our new free 2023 Experts Complete Guide to Creditors Voluntary Liquidation that covers Bounce Back LoansWe are experts in liquidation, voluntary liquidation, administration, pre-pack administration, business rescue, corporate rescue and company rescue, we can help solve your problems but only if you talk to us. Call 0800 9700539 for help.or email us your worries at 

Worried Director What Will Happen To Me After Liquidation?

Notice of Intention To Appoint Administrators

A notice of intention to appoint administrators is when the company files a document to the court to outline that it intends to go into administration if a solution cannot be found to its immediate financial problems. It can be used as part of the pre-pack administration process as well as used to restructure a failing business to avoid its liquidation.

Notice of Intention To Appoint Administrators
Man with umbrella

What Is A Winding Up Petition By HMRC or Other Creditor

A winding up petition is a legal notice put forward to the court by a creditor. The creditor petitions to the court if they are owed more than £750 and it has not been paid for more than 21 days. The application, in effect, asks the court to liquidate the company as they believe the company is insolvent.

What Is A Winding Up Petition By HMRC or Other Creditor

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