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Small retail clients - how you can provide a lifeline

Published on 3rd January 2020

The internet has decimated the high street, and shoppers are deserting bricks and mortar stores for their online competitors. Debenhams, Mothercare, Sports Direct - with yet more much loved high street names joining the lists of those in trouble, it is time to look at what can you do when one of your retail clients comes to you teetering on the brink of disaster.

One solution that is often suggested for larger retail chains is the Company Voluntary Arrangement or CVA. These have been more widely used in the over the past few years. They can often be the answer for struggling national retailers, who can use them to buy time, preserving value by shedding their worst-performing stores and crucially, using them as leverage to buy time with suppliers and to achieve a rent reduction across their remaining portfolio.

It is an approach that has provided a lifeline for some large players, supporting the re-sizing of many retail and restaurant chains across the UK. It has allowed businesses to continue and helped to preserve a significant number of jobs. 

But as an accountant, you will be fully aware of the advantages a large business has with a CVA. They may not have quite the scale to be thought of as too big to fail – but their loss would have such a significant effect on their suppliers and landlords that negotiations can clearly be in the interests of all parties.

In the current climate, empty retail space is not going to be easy to fill, and landlords would rather have a trading tenant at a reduced rent than a shuttered sore producing no income at all. This is particularly important on a retail estate where the loss of a flagship increases the fear of the domino effect. Losing rent on one location may be preferable to losing it on all of them, and the impact of business rates from empty stores.

But what about a CVA when your client is an SME? 

Remember, a CVA will need the approval of 75% of creditors. A landlord with a single property to fill may not take the same generous long-term view as one with a whole estate at risk. A supplier who has plenty of other outlets for their products may be even less ready to take a long view – and may press for bankruptcy to recover their losses.

Are you or your clients looking for help with funding, even in a CVA? Find out more about the solutions available today

What can you do to help?

Where a CVA is being considered, your help is essential. You need to look at the options and the alternatives.

How stressed is your client’s financial position – would it be possible to recover the core business – with some external funding and trimming of some assets and commitments?

What is the real cause of their problem – is one store bringing down a group? Is the problem a management issue? Could a shake-up of the directors help get the business back on track?

Could the business be sold – is there any value left in the operation as it stands – and are there any potential buyers out there?

How deep is the trouble the business is in – how much money is owed, and who are the creditors? Are they likely to be ready to take a long term view? 

Preserving value in the business and assets is a key responsibility for you as their business' accountant. There are plenty of suggestions that you could make once you are in passion of all the facts - an accelerated sales process, continuing to trade under the protection of the administration moratorium, a pre-pack sale, or even the sale of the business prior to liquidation could be considered. 

But it may be that an insolvency process could be avoided if you can help your client find additional external funding.

Obviously, commercial funding for a business on the verge of bankruptcy will not be easy to find – but there may be solutions, such as an equity investment that could provide a lifeline if there is still value and potential in the business.

Fortunately, at Rangewell we can help. 

At Rangewell, we are business finance specialists, and we may be able to help when your retail business client run into problems. We can help you find equity funding in circumstances where a medium-sized business has suitable prospects – and look at the other possibilities. Refinance or assets and property can be one solution. New approaches, such as an MCA might also offer a way to raise the necessary cash for a retail operation in the right circumstances.

Crucially, it may be possible to provide this type of funding even when a client is in - or you are considering - a CVA.

We work closely with accountants to help them find the financial solutions their clients need, and we have a team that can provide expert knowledge when it is a question of providing a financial lifeline.

Not only can we work with you to identify all the different types of business funding that may be suitable, we know the lenders who can offer the most competitive rates and those who may be the most appropriate for specialist funding. 

What's more, our services free for you to call on as an accountant partner, we make no charge to your clients - and we may be able to pass commission from lenders on to your practice.

It means that you have another valuable service that you can provide for your clients.

Find out more about working in partnership with Rangewell to find better answers to your retail and other clients' funding needs. Our service is free.


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