Home > Uncategorized > Nightmare ….

Nightmare ….

Here is a cautionary tale, well illustrated by Munch’s famous painting, The Scream

This week a new client of mine was seeking £150k short term funding. A well established business that had got itself into a mess. How had this come about?

Well, the incurred a bad debt which i understood to be around £840k. Unsurprisingly, the business has collapsed

A further complication to this is that because the bad debt is so significant and seemingly so carelessly incurred, HMRC imposed an injunction against the proposed pre pack administration. Why? Think this through and think collusion

Thanks fully that now appears to have been lifted but how did this come about?

My client apparently took advice from their bank on the credit worthiness of the debtor and were assured that because they were a PLC, then they should be fine. Absolute rubbish and I hope he has this in writing….

The debtor was a new business and of course there is the whole issue of lack of information. No accounts to look at and no track record. That should be cautionary enough but look a little deeper and there then a snippet of information may well have averted the whole shambles

Directors will often be relatively innocently involved in businesses that fail and i personally do not take the view that it is a significant negative, In fact, the opposite could be argued. But when this becomes a serious track record, then alarm bells should ring, and guess what? Yes, a whole string of failed businesses with huge debts

So what do we learn from this? Some will say that risk is part of trading Some will say that credit reports cannot give a conclusive picture

I would say that in response that this is complete rubbish. There are frequently clues and an experienced credit manager will know exactly what to look for and how to form a wider picture. And it can be forgotten that this can equally be significant for giving comfort as well as raising alarms

As for risk. £840k?

I would scream too…

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