With the passing of the autumnal season and the inevitable reference to specters, ghosts, phantoms, apparition or Zombies one wonders if this is the only time that they may appear? Like the warning about dog ownership is not “Just for Christmas but an all year responsibility” perhaps we all should think of our businesses and look out for the onset of becoming a Zombie.
So what are Zombie businesses?
Zombies remain under the control of thier banks or creditors as their personal financial slaves, since they have no will of their own. Banks & or creditors produce and sell specially-attractive products to clients with a hidden zombie astral inside, for the purposes of luck, increased wealth or business success. It is believed that after a time the client will be able to pay back the loan under the terms of their loans and so the zombie condition is an acceptable temporary business condition.
Signs of becoming a Zombie business (Insolvent)
Their are many investigations, claiming that a business can be turned into a zombie by two trading conditions introduced into the life blood of a business (usually via a final demand for payment). The first, coup de credit, includes lending terms no longer relevant to current market (local or worldwide) conditions. The second is often an internal issue that was never addressed or certain crucial assets are lost such as key personnel. Together, these conditions are said to induce a deathlike state in which the will of the business would be entirely subjected to that of the banks or creditors. The most recent issues raising ethical questions surround “Interest rate swaps” deals done with SMEs, most incorporated, where the rates moved against the clients and banks then quickly changed profitable businesses into zombies moving to inevitable closure.
Recently observed Zombie activity
One interesting point of reference in spotting a zombie business is the self imposed death walk of most of the UK and USA banks from 2007 onward’s. They, of all businesses, should have known how to spot the death-like condition they were in but preferred to seek political refuge and offer control in their fiscal governments (all be it temporary). One only hopes that all governments using their medicine of “Quantitative Easing” will be strong enough to ward off the return of the zombie banks.
The zombie also appears as a metaphor in protest songs, symbolizing mindless adherence to authority, particularly in law enforcement and the armed forces. Well-known examples include Fela Kuti’s 1976 album Zombie, and The Cranberries’ 1994 single “Zombie”.
Has your business become Zombie like?
This is one subject or business condition that no one wishes to discuss akin to the “elephant in the room”. Least of all with a finance broker or perhaps the accountants who carry out the annual accounts. Well somebody needs to consider when the situation needs attention as it could be the third time you’ve asked HMRC to stagger your payments to them and so on.
A Zombie business is an animated corpse brought back to life by means such as refinancing.
The time it takes to open confidential discussions with a broker, such as Bluecygnet Finance, is well spent and perhaps save the business or realign those creditors with better funding more suited to the business. All too often I’m invited to look at raising funding by the company’s accountants or directors but it is obvious that replacing a loan facility with another is merely “Passing the Parcel” with the inevitable suing for a CVA (company voluntary arrangement) or worse still bankruptcy.
Creditors often have a shortsighted attitude to waiting for final settlement which I see as jockey’s wishing their horse to be fed first or win the credit race thus jumping ahead to get their money first ahead of the pack. A creditor can petition the courts to deem a company insolvent if it owes them money and if it fails to pay or negotiate satisfactory payment terms within a set period of being served the demand. This gives so little time to do a lot for the business and save jobs etc.
Lets take a look at recognizing the signs of becoming insolvent;
- Consistently failing to meet your repayment terms
- Being declined or having trouble in obtaining (or keeping current funding line) new credit line or loans
- Filing your returns late or delaying HMRC payments
- Expenditure regularly exceeding income or money in the bank
- Your bank seeking new terms with your account or declining cheque’s or DD’s
- The final straw is selling off assets earlier than you would on a forced sale basis
We don’t “Trick-Or-Treat” our clients.
As a finance broker I only encourage clients to seeks solutions to their problems not to put off the inevitable as I have “Over 25 Alternative Ways To Raise Funding” for a business in the UK. If you prefer to have someone working alongside you seeking an early remedy, sifting through the NO’s and making introductions to expert insolvency practitioners who are able to guide and advise clients in the best way forward in line with current legislation and good business practice then give me a call.
I recently circulated information regarding insuring your business risks. In particular if you have given “Personal Guarantees”. If you have had your PG’s called in I would suggest contact an industry expert such as “David Tattersall” who has extensive knowledge of how to assist businesses and owners who find themselves nearing insolvency. David has also kindly supplied information assisting me in writing this article.