If your company is struggling and you’re looking for ways to save it, you may feel tempted to put more of your own money into it. However, while this might seem like a logical solution to cash flow problems or debt issues, it can actually cause you more trouble in the long run.
Putting your own money into your company could see you lose that money forever, if the company’s financial difficulties are severe enough that the company ends up going into liquidation.
Can directors be held responsible for a company’s debts?
If your company is registered as a limited company, directors are personally protected when things go wrong. This is because the business is a separate entity, and directors’ finances are considered unrelated.
However, once a director puts their own money into the company, these funds will be treated in the same way as money from another investor or creditor. As a result, your money could be lost if the company were to go into insolvency.
Should the company borrow more money?
When a company is struggling financially, banks and other lenders are less willing to lend more money or extend overdraft facilities for fear that their funds will not be re-paid to them. If they are prepared to lend further funds, the interest rates on those loans are going to be relatively high.
What should I do instead of putting my money into the company?
You should always be looking for ways to improve your company’s finances. Is it possible to sell some unwanted stock? Are there any late paying customers who you can chase for payment? Could you offer customers a percentage discount for paying early?
You should explore all possible options available to you – which may include putting more of your own money into your company.
Where can I get help for dealing with my company’s cashflow problems?
If your company’s money troubles are so severe that insolvency seems likely (or inevitable), then it is important that you should get professional advice as soon as possible.
With the help from a specialist Insolvency Practitioner, you can get expert support and guidance.
To find out how Clarke Bell can help you find the best solution for your company’s cashflow problems, just get in touch with our team today.
Give us a call now – before you put any of your money into your company.
(Our advice is free and confidential.)
