Growing Limited Company concerned about assets if something goes wrong

Growing Limited Company concerned about assets...

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Hi

My client company is growing the assets is starting to build up slowly now and they are investing in some plant/equipment. Should they face any financial difficulties in the future from clients not paying or going bust they want to cover themselves against any losses where possible. They are doing quite a bit with one client who seem to be showing signs of expanding considerably in the next 12-18 months, they want them to work with them moving forward.  They need to purchase quite a bit of machinery but are concerned that if they begin to have cashflow problems due to expansion, it may all go pear shaped, or if this one client cannot pay them, it will lead to further problems with cashflow.

If the worst did happen, the client would be unable to pay their debts, they want to potentially be able to keep their plant and machinery separate where possible, maybe in a separate company which cross hires it to the Construction business?

At the minute the client have around £100k+ invested in vehicles/plant so they wouldn’t want to be exposed to loosing it in the event another company were unable to pay us and thus caused them issues in paying their credit accounts.

Also would multiple companies offer better capital allowances to us overall?  I am thinking no in this instance as they would form a group, although having said that company A - has 5 directors and shareholders, director 1 and 2 have introduced 100k for the assets already, so if it was only director 1 & 2 who set up the holding company, what are the implications here?

One option would be to look at invoice factoring with insurance against losses such as this, although there is a cost implications so I need to try and consider the risk to reward with everything.

Any thoughts/ideas from you would be appreciated.

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By The Minion
02nd Mar 2015 12:05

There are a few options

But you are entering into a complex area.

 

1. Factoring is the simplest but most expensive because, like VAT it is a tax on the top line. Also what do you do if the factoring company refuses to fund that particular customers business/ I know it is a warning sign but would your client have the will power not to supply beyond the credit limit.

 

2. A holding company with the trading assets may be a point but there are costs for set up and on going operation, and it sis a bit defensive. If they are having these thoughts now is there a reason for the worries?

 

3. Good credit management is the key. THEY MUST STICK TO THEIR LIMIT. Do not let them exceed the threshold that they can afford to lose. Maybe a n honest face to face with the customer saying that they are delighted to join in the growth but it is a two way thing.

4. As far as Capital Allowances etc are concerned you would probably find that there would be a spreading of the AIA limit across commonly controlled companies and it is academic anyway because after this year we are back down to £25k anyway, which brings wit hit a totally separate set of problems...

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