Business in trouble

Discussion in 'Personal Insolvency, bankruptcy, etc' started by Michael79, 18 Apr 2018.

  1. Michael79

    Michael79 Registered User

    Hi guys and gals.
    Lookin for some advice and guidance on best way forward for my business
    I'll outline my position
    Sole trader in business over 5 years in retail
    Through various different cash flow loans etc trying to make ends meet I owe around 120k to banks and 30 odd to suppliers.
    We have a seasonal business half year quite busy other half not so much.
    We turn around 200k ex vat a year gross around 86k
    We have opened a side line business in store to help profit but it's a slow build.
    Had an overdraft but a business credit card over drew it and the bank pulled the facility leaving me with nothing only day to day turnover to operate. I've been tryin to get them to reinstate the od and term out the overdrawn account but they just want to term it out no reinstatement. I've had many meetings telling them that I can't operate with out the od as we have fast moving and slow moving stock both due in 30 days so we actually had too small an od in the first place, always owing suppliers never being able to sit on stock and try to build up a good selection in store. They don't want to know and I've explained I can't pay them if I've no business!
    Is the best option to dsa and get a job somewhere or try to struggle on with the business? If I BURN suppliers too I'll never get stock from anyone else, which I need to run the business, so any advice on what I could do? Maybe transfer whoever is willing to a company and then settle on my personal debt?
    Very stressed at the moment and can't see a way out. My mortgage is up to date and probably only worth what I owe. Two small kids and wife too. Joint names in mortgage
    Please help, it feels like I'm drowning and the business can survive with some tweaks and better online presence which I'm working on but with the bank making things impossible to pay suppliers and day to day stuff I'm afraid one of my suppliers will lose it and take action against me then I dunno what to do. Thanks
  2. gahfan

    gahfan Frequent Poster

    Did you seek any professional advice or go to MABS Michael?
  3. Brendan Burgess

    Brendan Burgess Founder

    Hi Michael

    If you gross €86k and owe €150k, it sounds to me as if your business has never been viable. A bigger overdraft would just get you into bigger trouble. It is only the bank loans which are fooling you into thinking you have a profitable business.

    Most businesses do fail within the first few years.

    First go to your accountant to see what he says. I suspect that he will conclude that you are not viable.

    Then you need to do an orderly wind down. Contact your suppliers and tell them to take their stock back.

    Look for another job.

    The alternative is that you have a viable business which makes €x but you are drawing down €2x as salary and funding that through borrowing.

    Again, this is very common - people living beyond their means and funding it through borrowing.

    In that case, you have to cut back your lifestyle.

    MrEarl and DeeKie like this.
  4. Brendan Burgess

    Brendan Burgess Founder

    Again a very typical complaint. Someone starting a business without enough capital. There is a tendency to blame the bank rather than realise the mistake you have made in the first place.
  5. Michael79

    Michael79 Registered User

    Thanks for the replies! I am thinking the same way myself in terms of viability. I suppose the romanticized notion of owning a business is just that, but I didn't and still don't want it to fail.
    I'm in a tricky position 're the wind down, we aren't holding a lot of stock(Not long enough terms with suppliers for them to allow us to sit and hold it, some of it takes 3 or more months to shift) tryin to compete online at the moment is foolish given the range and buying power they have. We could dip our toes and do every week but in today's market, people just get it on their phone if we don't have it in stock.
    Not complaining about this it's the way things are, and suppose I can't do much about it really either!
    In terms of lifestyle, I live frugally and our mortgage is very small, unfortunately it's one of those businesses that we can never tell what we're going to turn week to week! So it's hard to budget what we can afford to spend and we don't spend much.
    So in terms of wind down, would u advise that I seek a dsa or what do you think?
    If I get a job and don't have enough to pay something above the rle I'm looking at bankruptcy and I can't risk the family home, I couldn't live with that after working so hard to get it and raising our kids in it.
    I can face facts about the viability of the business, no problem there, I don't want to say much but I do think there is a chance it survives, it's a unique type and we are the only one of its type in a huge radius, potentially it can generate more profit for sure, but I don't think I'm blaming banks.I made my mistakes for sure and maybe I could struggle on for a while, but my options for getting out? I'd like to hear anyone's opinions
  6. Michael79

    Michael79 Registered User

    In terms of starting without enough capital, I agree, I started with nothing, but in 2012 no bank would even consider giving me capital. Is this a blame assignable offence? Dunno what the option would be if the bank refuses you adequate capital to start the business? Do you just say feck it I won't bother?
    Not being a smart arse Brendan and I really. Appreciate your advice here, but if the banks aren't lending and won't advance what anyone would consider reasonable capital to start trading, what is one to do? Bear in mind this business was trading I took it over, our first year we turned 200 k off the bat , but the advent and prevalence of the internet has finally come calling and we were never in a position to compete. Now again, no blaming anyone here, that the reality of it and whatev mistakes I made I can live with them.
    No disrespect intended again, but not all retail is the same and some of it is multi faceted and layered and varied. Having spoken to many other businesses in other cities and towns that do the same as us they've all outlined the key to making a success. And unfortunately for me, that is available capital, usually in the form of a large od, allowing a huge stock presence, and no big monthly payments on loans, so the stock attracts customers and walk in trade, allows you to have better online presence, and you buy it with pro forma discount so you make more margin.
    Then your store becomes a destination not a passing look in the window and wander in shop.
    It's an odd business and no-one in banking or otherwise really gets it or gets what we need.
    I can face the wall and make the chop if needed but it's frustrating when I know what I need and can see the potential but cannot get the things I need to see it through.
    But that's life I suppose, the old 9-5 at least is a pay check, lot to be said for that too!
    Thanks again in advance for any replies and I do appreciate any opinions or advice I'd just like to stay fighting if possible!
  7. Michael79

    Michael79 Registered User

    Yes meeting them and a pip next week for advice. Will consider all options before doing anything drastic
    DeeKie likes this.
  8. Brendan Burgess

    Brendan Burgess Founder

    If you have borrowed €150k and haven't got a lot of stock then it is clear that your business has been losing money or that you have been taking out far more than you are making in profit. And you have been funding this through borrowing.

    MrEarl likes this.
  9. Brendan Burgess

    Brendan Burgess Founder

    They are separate issues. First you must assess whether your business is viable or not. From the numbers, it sounds as if your business is not viable. So you should return the stock to the suppliers and close the shop.

    After that, you consult a PIP about the best way forward to deal with your insolvency.

    It's critical that you and your wife get new jobs and start earning. If you don't mess your creditors around, it's quite likely that your PIP could do a deal with the creditors which would not involve either a DSA or bankruptcy. But really only a PIP with the full figures could sort that out.

    But you have to face the reality. You are in an business which is not viable. You are personally insolvent by around €100k. You can't walk away from this without any consequences.
  10. Brendan Burgess

    Brendan Burgess Founder

    Banks are not in the business of providing venture capital. They are not taking a stake in your business.

    It's amazing how many people with failed businesses blame the banks. You should not start a business unless you have enough capital. In this case, the bank is doing you a favour. Your business is clearly unviable and they may force you to face the inevitable. If they continued to provide you with credit, then you would continue losing money and you would make the situation worse.

    Banks do not provide capital. It is the role of the entrepreneur to provide the capital through saving or outside investors.
    newirishman likes this.
  11. Jim Stafford

    Jim Stafford Frequent Poster

    In advance of seeing your PIP you should prepare a trading budget and a cash flow forecast for the next 12 months in order to assess your on-going viability.

    In terms of preparing a cash flow forecast you could make critical assumptions, such as "freezing" bank payments. However, you will need some banking facility to process credit cards and debit cards.

    A bigger opportunity/issue for you might be your lease. You might have a valuable leasehold interest that you could sell. Alternatively, you could have substantial liabilities if you break the lease.

    You might also have an issue with employee claims for redundancy etc.

    Jim Stafford
  12. Michael79

    Michael79 Registered User

    Hi guys, so after a bit of thought, I pulled the plug on my business. You guys were right and I've secured a job starting Monday week, I've someone to take over the business as a fresh start, and I'll be writing to my suppliers and creditors once I finalise his takeover of the lease this weekend.
    The relief I feel from finally bein able to let it go and realise it was not a good thing, and the millstone around my neck that it was is getting lighter.
    I'm going to try get a debt settlement arrangement, so I'm going to offer 200 a month over the 5 years.
    Does this sound realistic? Other than that I'll be forced to bankrupt and they won't get anything, but I'd prefer to make the contribution to the debt, rather than say feck it and just go for bankruptcy.
    So 165k odd in total and circa 12500 to creditors over the lifetime of the dsa. My rle is about 2400 a month, job pays 620 a week net so that's 2686 a month leaving me about 200 or 250 to service the debt.
    Do you think they will accept? Have a pip lined up ready to go just have to do the pfs and issue the cert
  13. LS400

    LS400 Frequent Poster

    Fair play to you Michael for giving it a go in the first place.

    Sorry it didn't work out for you.

    This Country needs risk takers, the likes of your self who are willing to take a chance in life, as without them, how in heck can we as a Country prosper.

    Brendan's simplistic view of going into business and happening to have a money tree in your garden is all fine and dandy, but in the real world, countless businesses would not have materialised without the help of a bankroll for seed money.
    galwaypat and AlbacoreA like this.
  14. AlbacoreA

    AlbacoreA Frequent Poster

    Yeah. Hope it all works out for you.