Should I Put My Own Money Into a Failing Company?

In brief, NO!

It might seem like a good idea to put your own money in to try and save your business, but should the company eventually fail you are unlikely to see it again.

This is because a limited company is a separate legal entity, and if it does fail you’ll be treated like any other creditor. – This makes it probable you won’t get anything back unless there are assets to distribute.

Also, if you do put your own money in and continue to trade you’ll probably end up building more debt, this could actually leave you personally liable for them in the future.

What you need to do instead

The first thing to try is to see if there are any other ways to get some cash into your business quickly, for example is there anyone who owes money or is there any assets or stock that you could sell at a discount – you may not get as much but it is better than going further into debt.

You could also try to get money from elsewhere, unfortunately when a company is struggling or failing then it’s highly unlikely that a traditional bank will want to lend but there may be other ways to raise finance and inject some much needed cash.

If you can’t raise any money then you need to take a good look at the circumstances around why the business is failing.

Is it because sales have gone down? Is there a way you could improve sales with an effective promotion or marketing plan?

Have a look at where you could make savings in your business and cut the outgoings. Moving premises could help in the long run. Can you cut staff hours until business improves – this could be preferable to letting them go altogether.

We are here to help you

If it has got to a point where your company is insolvent (can’t pays its debts when they fall due) it is critical that you speak to an insolvency specialist as you have a responsibility to your creditors, shareholders and employees.

And remember, you should also consider not continuing to trade as this could make you responsible for the company debts.

You can reach me on 0800 975 0380 or via [email protected]