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TRUSTED BUSINESS ADVICE

Should I prop up my company with my own money?

It can be tempting to put your own money into a struggling company when you’re desperately trying to revitalise it.

Using your own finances to prop up your business in the short-term is often a consideration – and sometimes perfectly acceptable.

But it’s important to remember that should the company eventually fail; you’re unlikely to see that money again.

As a limited company, your business is considered a separate legal entity. If it does eventually fail, you’ll receive the same treatment as any other creditor.

That means you probably won’t get any of your finances back unless your company has assets to distribute.

If you decide to put your finances in and continue to trade, you run the risk of building up even more debt, for which you could eventually be personally liable in the future.

What are my options?
First, you need to establish other ways to get cash into your company quickly. 

Are you owed money, or are there assets you could sell at a discount rate? It may not be as much as you’d typically hope to receive, but it’s better than getting further into debt.

When a business is seen to be struggling or failing, it’s improbable that a traditional bank will be willing to lend money.

If you’re unable to raise more money, the next step is to take a good look at the circumstances around why the company is failing in the first place. Then, analyse where you might be able to make savings and cut outgoings.

In the long run, moving premises could help. Perhaps you could cut staff hours until business improves – it’s certainly preferable to terminating their employment altogether.

What do I do next?
If you’re at the point where your business is deemed insolvent, you have a responsibility to your creditors, shareholders, and employees. Therefore, you must speak to an insolvency specialist as soon as possible.

You may need to consider ceasing trading, as continuing could make you responsible for further debts.

At this stage, it’s highly advisable to take expert advice before proceeding. Contact the Future Strategy team for help.

We can talk you through all of your options and find you the right solution

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