What can I do to save my company if the bank has security against the company's assets or me personally?
Security against the company
The issue of the bank comes up in almost very case when we try and save companies. This is the case whether the company owes lots of money to the bank and cannot afford the repayments on a loan for instance or the company has factoring or overdraft finance. The bank cannot control the actions of unsecured creditors such as HMRC. So if the business is not performing or has breached the terms of any lending agreements, the bank can feel exposed and it may call in administrators or receivers if the bank recovery team feels that the bank is compromised. The banks are able to do this as the bank is usually a secured lender. See our page on fixed and floating charges which explains their position.
In addition the bank may have asked for a personal guarantee from the directors or the partners of a firm. In these situations the natural thing for directors/partners to try and do is to pay the bank but not trade creditors or HMRC if the business is in difficulty. Unfortunately this can be construed as creating a preference under S239 Insolvency Act 1986 but in reality this sort of preference is not quite the same as paying off your family member or repaying a directors loan. It can still bite though if a liquidator is appointed
So what can be done about the bank and its security?
Just because a bank has security does not necessarily mean the bank will stop a rescue plan such as a CVA. Far from it in fact. Almost every rescue deal involves a bank, in almost 100% of these the banks are supportive of a deal, such as a CVA, that doesn't impact the secure lending. Why? because a CVA can remove the risk of a winding up petition which,, as we said before, it cannot control. It is in the bank's interests for the company to continue trading and banking receipts with the bank. If this means that you can write off some of the unsecured debt then that can be good for the bank! A CVA does not bind the secured creditors but it is important to have a dialogue with them.
We can assist with that if OUR EXPERTS CAN OFTEN NEGOTIATE LOAN REPAYMENT HOLIDAYS FOR EXAMPLE. We negotiate with creditors and the bank on behalf of clients everyday.
If the level of debt is such that the company looks like it cannot survive then the bank may well appoint an administrator but given the costs involved in an administration then this is more likely to occur in larger businesses with £500k T/o+. In a smaller business then the directors can go down the path of voluntary liquidation and the bank is just informed once we are instructed.