Overview
Like many other businesses, our client had taken a financial hit during the 2020-2021 pandemic. Work intake was down, and overheads could not be met. The senior staff member expressed an interest in purchasing the business, and the director was keen to accept, but outstanding debt was standing in the way of moving their plans forward.
About the company
This automotive repair business had been established for 3 years since 2018. With just a director and one senior bodywork repair professional employed, the business had a healthy turnover of £300,000.
The challenge
When the COVID-19 pandemic hit, government restrictions forced this business to close its doors for an uncertain period. The director had taken on debt to cover 12 months of overheads in the hope that work would soon resume as normal, and the debt could be comfortably repaid over time.
Sadly, the pandemic was not short-lived, and restrictions were prolonged. The business was losing so much money, the director had been unable to draw wages for 3 months and his personal finances were at risk.
The senior staff member was interested in taking the business over and waiting out the storm. However, the company came with considerable debt. With £40,000 worth of debt to the HMRC and in bounce back loans, the staff member did not want to buy the business as a whole and inherit the pre-existing financial issues.
In addition, there was a personal guarantee on the company premises which would become effective if the company went into insolvency – selling the business was the best play all round.
“The intake of work had halved due to COVID-19 restriction… there was not enough income to support both sets of wages.”
– Ben, Case Manager
How we helped
After consulting with the client on the options available, we advised on the best way to sell the business to the senior staff member, overcoming the hurdles we’d identified.
Firstly, we arranged a pre-liquidation valuation and sales of assets via an independent valuer. This meant the company could be liquidated and the assets could be purchased to create a new business without inheritance of the debt.
In the meantime, to work around the PG on the premises, the lease was transferred to the senior staff member prior to liquidation.
“Although under new ownership and through a different company, the business would still be able to offer its services to the local public.”
– Ben, Case Manager
The result
The director was able to exit the business and put an end to their financial downturn and stress.
The assets of the business have been put to good use. Although under new ownership and a new name, service has been able to resume as normal for their regular customers and local public.
“The assets are being used to good effect. The same service is available to the local town and jobs are being created. The director has been able to move on without any financial burden.”
– Ben, Case Manager
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