MORE THAN INSOLVENCY...

​...CONFIDENTIAL BUSINESS SUPPORT AND ADVICE TOO

With this post we wanted to highlight some of the other important services we offer, when directors and partners of companies need financial and business support.

CASE STUDY - HOSPITALITY  CLIENT & BANK LENDING 

The client will remain anonymous, as the services provided were business support and advice and not a formal insolvency. This particular client was within the hospitality sector, although these services can apply to any.
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In November, a restaurant/hotel had breached its overdraft limit, and was struggling to manage cash-flow with the limits of the agreed overdraft, as a result the owners of the business had been requested by the bank to undergo a independent business review   in order for the bank to assess whether the business was insolvent or whether they would be prepared to continue supporting the business, and if so on what terms.

The key issues were;

• The current business had been experiencing cash-flow difficulties due to inefficiencies within the business. 
• Occupancy rates had fallen, albeit this was in part offset by higher room rates and direct bookings which result in lower commission costs.  
• An acknowledgment of the need to improve performance in order to cover the seasonal cash-flow without temporary bank lending.  
• The knock on effect of another a loss-making business needing time to over-come a one-off bad debt.

These issues are not unusual and are likely to be common issues that many in the hospitality sector have faced at one point or another during the course of their business. 

As such the owners felt an overdraft of £50,000 was required short term to see them through over the Christmas period and low season, compared with an agreed overdraft facility of £20,000.

LM Insolvency & Advisory Limited carried out a review of the business and possible improvements, cost savings and management of the cash flow. The  outcome was to reduce the lending requirement to a peak of £40,000, in addition the review was able to provide the bank with comfort of the business's ability to repay the overdraft during the forthcoming peak season.

Alternative options including other lending and formal insolvencies were discussed with the owners and considered so that an informed decision on the way forward could be made.

The final outcome was an agreed temporary overdraft with the business's current lenders for the £40k to April 2019, providing the owners with certainty of trade over the Christmas period and the comfort in the medium term of the support whilst they seek to trade through the cash flow difficulties, and implement changes that would bring about higher efficiencies and cost savings.

Whilst we unable to provide the full details of this case, due to confidentiality of the client, we hope this highlights some of the other services we offer, including, but not limited to, independent business reviews, cash flow, management and forecasting, stakeholder management in particular creditors. Should you  relate to  any of the above issues, or are interested in our business support services please do not hesitate to contact Lucinda at lucinda@lminsolvency.co.uk or call 07972928153 for a coffee and chat to discuss further.