Print Sector Company Hamstrung by Poor Financial Management

The Challenge

A printing company with a turnover of approximately £990,000 faced severe financial difficulties due to a combination of internal and external factors. Despite significant business growth over the last two years, the company was financially unstable. This instability was primarily caused by a long period of poor financial management and investment in equipment based on an inaccurate view of cash flow. Their existing invoice factoring facility was also insufficient to support the rapid business growth. The company was unable to pay its debts as they fell due, and both HMRC and trade creditors had threatened to wind it up. With unsecured debt totaling £400,000 and the risk of a personal guarantee being called on an overdraft of £25,000, the directors faced an immediate and critical situation. The connected creditors, including directors’ loan accounts, amounted to approximately £78,000.

The Solution

In September 2015, the directors of the company contacted RNT KSA to assist with a Company Voluntary Arrangement (CVA). The company had already taken initial steps to reduce its overheads by cutting several payroll positions and closing a second site. KSA’s appointment was intended to formalize this restructuring and address the outstanding debts. However, during the CVA process, the directors also pursued an alternative solution to their cash flow problems. They successfully negotiated and secured a new invoice finance facility with a different provider on more favorable terms. This new facility provided the necessary funding to support the company’s growth and meet its financial obligations. With this new arrangement in place, the need for the CVA diminished, and the company was able to move forward without it.

The Results

The company decided not to pursue the CVA, and KSA’s appointment was terminated. The directors’ proactive efforts to find a more suitable invoice finance facility ultimately resolved the core cash flow issue without the need for formal insolvency proceedings. This outcome meant the company could continue trading and avoid the complexities and potential consequences of a CVA. The company successfully addressed its financial difficulties, allowing it to continue its operations from its single leased industrial unit and protect the jobs of its 25 employees. The successful negotiation of a new invoice finance facility proved to be a powerful alternative to a CVA, demonstrating that sometimes a restructuring can be achieved outside of a formal insolvency framework. This case highlights the importance of exploring all available options and how a direct financial solution can be the most effective path to recovery.  Preparing the CVA was able to buy time for the director so he could look at alternative options