It has been reported by Experian that up to a quarter of directors of SMEs are using their own cash to finance their business, even to the point of putting their homes at risk. In addition, many directors have admitted to using high interest credit cards for everyday business expenses.
Our advice to directors is please be careful. If monies are loaned to a business by a director and then repaid shortly before the business enters into a formal insolvency procedure, then the subsequently appointed liquidator may seek to challenge this transaction.
If directors are using high interst credit cards to fund the business then they should make provision in their personal finances to cover this high cost finance in the event that the business is unable to repay this debt.
Banks and other lending institutions take a great deal of care when they are introducing monies into a limited company and we urge anyone be it a director or trade creditor to take a similar amount of care when theyu are providing credit to a company.
If in doubt, please take professional advice either from us, your accountant or solicitor.
It is important for anybody facing financial difficulties, whether personally, directors of limited companies or partnerships, to seek advice from a licensed insolvency practitioner as soon as possible.
To take advantage of our free consultation, please telephone Stella Flemmings on 01377 257788, 01724 230060 or 01904 520116 and she will make you an appointment with one of our insolvency professionals at one of our offices in Driffield, Scunthorpe or York. Alternatively we can meet clients at their premises or those of their professional advisor.
Redman Nichols Butler has been established in Driffield for 17 years now and specialises in advising SME businesses in the whole of East and North Yorkshire and Lincolnshire. The Redman Nichols Butler Driffield office address is Maclaren House, Skerne Road, Driffield, East Yorkshire, YO25 6PN