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Firms not educated about dealing with failure 2 February 2010
Steven Jackson (about the author)

Struggling firms fail to seek third party help early enough, according to restructuring and insolvency group MCR.

Many firms continue to believe they can pull themselves out of financial difficulty, but this "head in the sand" mentality can lead to businesses collapsing, said the firm.

David Grier, partner at MCR, said: "There’s a wide-range of courses for businesses on how to deal with the boom times, and making profits – but very few courses teach even the simplest practices of how to deal with insolvency."

Solutions must be identified early

MCR has recently launched its Debt Advisory Group, designed to work with businesses to identify effective and appropriate funding solutions. By coming in at an earlier stage, the group is able to work on negotiating facilities and agreeing terms and conditions with both current and prospective lenders.

John Potts, MCR director, said: "This service is a bid to educate businesses and provide expert health checks. We ask firms if they can say with certainty the business will have enough cash in the next three to six months, what is the firm’s relationship like with banks and if the firm is aware of what advisers could do."

Steve Jackson of beatmydebt.com agrees that many company directors and business owners do not understand their options when it comes to rescuing a company. "Business owners need to understand their options so that they can take appropriate action early anough. Taking advice early about the full range of solutions is the key." he added.

MCR predicts a jump this year in businesses seeking restructuring solutions as the economy exits the downturn. A number of revolving banking facilities are set to expire in 2011 and 2012, creating a sense of urgency to arrange refinancing.

Paul Smith and John Hunt will head MCR’s Debt Advisory group. Prior to joining MCR, Smith was responsible for Bank of Scotland Corporate across Greater Manchester, Lancashire and Cheshire.

Hunt has over 20 years corporate finance experience gained in the accountancy profession and also in industry. He has wide international experience having worked for several years in USA and Scandinavia.

Source: Credit Today