A company of long standing had begun an expansion due to demand for outside catering. To service this demand, larger commercial kitchens were required and additional equipment for preparation on-site.
The company had utilised a combination of reserves and new funding, which the sole director had guaranteed personally. The business began to over-trade due to the demand, and the director lost sight of the direction the business was heading. The business began to lose money quite substantially, with neither the restaurant nor the outside catering operations being run properly.
The company defaulted on loans and could not meet suppliers’ demands for payment. It appeared as though the director may go bankrupt personally. A strategy was put in place where the company focused back on the restaurant and reduced the outside catering to selective work. Prices were increased, and margins and service improved.
The company began making profit on lower turnover and created surplus cash. Negotiations were entered into with the finance companies on a partial debt write down and a reschedule of the balance. Suppliers agreed new terms to clear the arrears and keep supplying on terms.