When a business experiences financial difficulties, some people believe it’s only a matter of time before they are forced to cease trading. There is still a perception amongst some that business rescue represents the death knell for a company. While there are certainly times when business rescue is necessary to ensure the survival of a company, this perception is largely due to outdated misconceptions regarding what business rescue entails.
With the correct approach to your business rescue options, your company can benefit greatly by resolving financial difficulties, protecting employment and providing breathing room for viable businesses to begin to recover. Here are 5 common myths about business rescue and the realities surrounding them.
Myth 1: Business Rescue Is An Automatic Sign That Your Company Is Failing
One of the biggest misconceptions is that if a company enters into business rescue, it will inevitably fail, but the whole purpose is exactly the opposite. These strategies have been created to assist financially distressed companies which demonstrate a reasonable possibility of being saved.
Using the right advice and developing a well-considered rescue strategy, a company may be able to reorganise its finances, rectify operational problems and return to profitability.
Myth 2: Business Rescue Strategies Are Only Available To Large Companies
These strategies are not only used by large corporations. Cash flow problems, rising costs, creditor demands and other financial challenges are just as likely to occur in small and medium-sized enterprises as they are in larger corporate organisations.
For SMEs specifically, recognising potential financial difficulties and acting upon such recognition early on can be critical. Early intervention by a business rescue specialist allows the company to assess its specific situation and determine whether business rescue would be beneficial to the company.
Myth 3: You Will Lose Control Of Your Business
A concern held by many companies is that once the company enters into business rescue, the current owners of the company will lose control. This is true for Company Administration strategies, but only on a temporary basis. And aside from that, there are plenty of other strategies available.
Most of the time, directors will remain responsible for managing the day-to-day activities of the company. The ultimate goal is to find a resolution that provides the company with the best opportunity to recover, and that is not necessarily Administration.
Myth 4: Business Rescue Is Only About Buying Time To Protect You From Creditors
While some strategies, such as a Company Voluntary Arrangement (CVA), provide protection against creditor legal action, the benefits extend far beyond merely delaying creditor action. An effective business rescue plan addresses the root causes of why a business is experiencing difficulty and works to address them. This can include debt restructuring, cost reviews, changes to how the operation works, negotiations with creditors or finding ways to increase profitability.
Myth 5: It’s Already Too Late For Your Business
One of the most dangerous perceptions out there is that it is always too late once a business requires assistance via business rescue. It’s absolutely true that the swifter you act, the better the chances of recovery are, but financial problems don’t need to represent the demise of a viable company. As long as a company remains viable and is dealing with either temporary or manageable financial difficulties, business rescue options provide a framework, protection and sufficient breathing room for the company to potentially recover.
If you want to hear more about how to rescue a business or find yourself in need of professional business rescue advice, don’t delay. Get in touch with us at Ballard Business Recovery for assistance, and we’ll help you by walking you through your options and working with you to achieve the best possible result for you and your company.
