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Invoice Finance For Phoenix Businesses

Find out how invoice finance can provide crucial funding to phoenix businesses

Read on below or talk to an expert

What is a phoenix company?

‘Phoenix company’ is a term used to describe a business which has been started up to continue the trade of another company. The new business is usually used to pick up the activity and order book of a recently liquidated company, with no gap in trading.

They will usually have the same directors and shareholders and will continue trade with very little disruption to customers. The previous trading company will then usually enter into insolvency proceedings or will be dissolved.

Why is invoice finance a good option for phoenix businesses?

As the lender is reliant on payment from third-parties, rather than the borrowing entity, funding can be much easier to secure than other types of finance.

Other types of funding, such as business loans and asset finance may be less straightforward, unless you offer significant amounts of security.

What is a pre-pack administration?

A pre-pack administration is a method of liquidating a company in the UK. A pre-pack administration involves the sale of some or all business assets prior to the appointment of an administrator.

The main difference between a pre-pack administration and a conventional administration is the fact that the sale of assets is pre-agreed. The administrator would usually look to negotiate the sale once appointed.

Where pre-pack administration is used to fund a phoenix company, trading will often continue through a new limited company with little to no break.

What is a CVA?

A CVA (Company Voluntary Arrangement) is a debt management tool for insolvent limited companies. It works in much the same way as an IVA (Individual Voluntary Arrangement). It allows the company to pay its creditors over a fixed period. In order to be allowed to enter into a CVA, the company’s creditors must vote to accept the terms.

The terms of the CVA will be defined by an insolvency practitioner, who will calculate a suitable arrangement for all parties. The arrangement will cover the amount of debt to be repaid and the monthly payment.

The insolvencies practitioner has one month to complete this task and must send over the proposal to all creditors. To be approved, at least 75% of the companies creditors must agree. If agreed, the company will be allowed to continue to trade.

Failure to maintain the repayments can result in the liquidation of the company through a winding-up petition, which can be applied for by creditors.

The reason for the previously closed companies is key

There are many reasons for a company to be closed down, or enter into a CVA. Where there has been an unexpected event, a series of problems or a large customer defaulting, there is hope. If the problem was isolated, is now resolved and the future prospects are sound, then a lender will take a kinder view.

The flip side to this is a business that has seen revenues fall over a period of time will struggle to secure funding. Problems with mismanagement or a chequered past will also cause issues.

Where liquidation has been undertaken to avoid payment to HMRC, creditors or others, we would be unable to help. We are more than happy to fund companies who have had to take action to protect the business where there are no moral or commercial issues with the action taken.

Securing the right funding for you

We work with lenders across the whole invoice finance market and we’re keen to help. We understand that issues can arise when you’re running a business and it can seem like nobody will lend to you.

We do have lenders on hand who are happy to fund you through any rough patches. Every situation is different, so the best way to find out how we can help, enquire online or call us to talk to one of our invoice finance experts.