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Ltd Company Secured Overdraft & Factoring & Liquidation HELP


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Very long winded, but here go's.


In September 2008, got a call from bank managerstating that the bank insist we fully secure the overdraft (£70,000), or the bank would look to remove the facility. At that time the Ltd co. had a negative balance sheet (£75k), but was trading a profit, and things were looking positive that it could trade through. Although we initially resisted this request, pressure was increased until in November, we either had to concede or close the business. We agreed, but decided to increase the facility to £100k as cash flow was always poor over the festive period (this would give us quite a bit of breathing space, whilst we were restructuring). We agreed to charges over our properties.


Errors by the banks solicitors (their admission), meant the overdraft was not in place until the 21st January!. This delay had caused the return of a fuel payment. The fuel supplier decided to close the account as payment was delayed too long due to the overdraft not being in place. This supplier had given us 7 week payment terms, and our new supplier would only offer 7 days! Given that we were using approx £13k of fuel per week left us paying 2 fuel bills at the same time! and approx £78k out of the cash flow!. We were lucky enough to recieve £50k from the government backed transitional loan fund, but this still left us slap bank up against our new £100k overdraft.


The company continued to re structure to the changing market, increase sales and manage a small profit, however, things began to change in early May 2009.


The factoring company (part of the same bank), were not happy that we had been in a temporary contra trading arrangement with one of our customers. We had told them in October 2008, and we were advised that if we wanted this to become a permanent situation, then we needed to tell them. This temp arrangement had ended in Jan 2009. They bank persued a non offset letter from the our customer, and at first they seemed to be in favour of signing this, then on the 21st May 2009, the factoring company dissapproved the whole ledger of our customer, leaving us with a negative of £110k !. They done this without telling us!. We then had to provide details of critical payments which they would fund until this letter had been signed. We were still able to trade at this point , and in fact, secured new business to the tune of £450k pa which was to start in late June & 1st week in July.


The bank wanted to understand the position of the business better, and visited on the 3rd June, and was also attended by the Ltd Co financial mentor (part of the transitional loan fund agreement). At that meeting we provided cash flow forecasts, which included the newly won business, showing that the cash flow was tight until the end of June, beginning of July, then the cash generated by the new sales, would start having a positive affect on the cash flow, and start creating some headroom.


The financial mentor stressed to the relationship manager (factoring company) that we were being very pro active, and the company outlook was positive.


The bank insisted that we passed over to tham a ledger which was previously outside the agreement due to cantra trading, stating that it would give them more security!


They also requested that we have our accountants project the business P&L, Balance Sheet, and cash flow to include the newly won business.


They agreed to fund critical payments until the figures were made available, or the non offset letter was signed by our customer.


The bank continually pressurised the customer (sometimes 3 to 4 times per day i found out later) to the point that the customer refused. (I found out that our customer sensed that there was something seriously wrong due to the pressure being exerted, and as such , decided to protect their interests).


At this point the bank refused any funding, and as such , we were unable to pay fuel bill, our account was closed. We had to stop trading. Our figures came through from our accountant the following day, showing that we were on line to make a £90k profit, to have a positive balance sheet, be within our overdraft limit, and be paying all bills as they fell due.


To add insult to injury, as the ledger was collected out, it showed a surlpus of around £38k, which we requested be transferred to our business account, to help offset the overdraft. They refused, on the grounds that we were not trading. I advised them that we had not decided what to do with the company and had not appointed a liquidator. This made no difference, they still refused.


We finally appointed a liquidator on the 15th July. Out of the £38k, the factoring bank gave £8k to the liquidator, and kept the rest as "cancellation fees".


We have complained to the bank (recoveries), who could not get a response to the factoring arm as to their actions. We are due to meet with the factoring bank over the next couple of weeks to try and resolve the complaint.


Can anyone give me any advice as to how we stand with all of this mess, what our chances are, and any pointers we need to stress in our defence.


We have been left with liabilities of over £200k due to lease agreements, overdraft facility, and other directors guarantees.





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Hi Mine


Welcome to CAG


The guys will respond shortly, unfortunately I don't have the relevant experience to advise you, but others do.

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