Raising cash and capital for businesses can mean the difference between insolvency and staying afloat. Selling old or unnecessary equipment can be a quick and easy way to raise funds.
With over 1.6 million businesses receiving Coronavirus business loan schemes worth over £80 billion¹ since the start of the pandemic, Yorkshire online auction specialist BPI Auctions has worked with reputable insolvency practitioners to provide a guide on raising funds to increase business growth and payback support packages taken over the last 18 months.
1. How can selling assets support a business?
It’s almost needless to say that selling certain types of assets can be very useful for a business at any time, not least of all as part of its environmental policies. Charles Brook, partner at insolvency practitioners, Poppleton & Appleby says, “Redundant assets such as furniture or equipment (and even stock) take up valuable space and may even become a hazard or a burden to get rid of at a future date. Selling these whilst they are still of use to someone is a practical way of raising funds, tidying up, possibly even improving a working environment, and demonstrating Green Credentials.”
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2. What should be your main considerations when selling business assets?
Managing Director at Forbes Burton, an insolvency and business consultancy, Rick Smith advised, “Selling assets is something many businesses choose to do to help inject much-needed cash into a business. However, we often see that many companies neglect to look at how they sell them. If a business has already gone into the insolvency process, then goods need to be sold at market value, not undersold and particularly not at a reduced rate to directors.“
Experts from BPI Auctions highlight how online auctions allow you to reach a larger pool of buyers and sell quickly and efficiently. “Speed is often key. By selling by auction, from the moment you issue an instruction for equipment to be listed online, it will sell within a selected short period, often selling 3-4 times faster (on average) than selling privately. Not only does it allow for a speedy process of sales, but it also enables you to meet a widespread number of interested bidders, creating an opportunity to sell the item for an amount significantly more than expected.”
3. How to liquidate a closing business’s assets
The process of liquidating a closing business’s assets will depend on whether the company is solvent or not advises Rick: “If the business is solvent, then the director can sell the assets themselves. However, it may be more tax-efficient to undertake a Members Voluntary Liquidation – this can only be carried out by an insolvency practitioner.
“Conversely, if the business is insolvent, then the directors should seek to appoint an insolvency practitioner to undertake a Creditors Voluntary Liquidation – this is where the assets are sold, and the proceeds are distributed to the creditors. It’s one of the most efficient ways to close a business and satisfy at least a portion of the monies owed.”
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4. How to choose a reputable insolvency practitioner
Choosing the right insolvency practitioner for your business will determine how effectively you may be able to achieve the desired outcomes for the company. Charles advises to speak to your accountant first, “If your accountant doesn’t have any existing relationships with a Licensed Insolvency Practitioner that they trust, you can look visit GOV.UK or R3 (The Association of Business Recovery Professionals).
“Always try to speak directly to a Licensed Insolvency Practitioner that is local to you and has the requisite experience and training to help. Licensed insolvency practitioners are trained and qualified to assist, and they are independently regulated by one or other of several bodies which are themselves overseen by The Insolvency Service.”
Rick also highlights how research is critical when choosing the best insolvency partner, “Read case studies of what they have handled before and choose one that has dealt with businesses of a similar size. Some of the top insolvency practitioners, while impressive, deal with the likes of blue-chip companies and multinationals, so attention towards SMEs can be patchy.”
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5. Plan for the post-pandemic world
With the pandemic upending the global economy, many businesses spent the past year trying to achieve or maintain stability. “Future-proofing can sometimes seem difficult when business is good; many businesses simply don’t look forward to unanticipated periods of downturn. It might not be the most thrilling use of time, but planning and deep monitoring of market conditions can mean you are ready for a variety of scenarios,” highlights Rick.
BPI Auctions commented: “Saving costs should always be a priority in business planning. When selling assets via an online auction, you incur considerably less cost by not setting up an in-person auction event and reducing advertising costs you would usually pay when promoting a sale.”
Liquidation of Closing Business Case Study – Amtech Developments UK Ltd
BPI Auctions was appointed by ‘Amtech Development UK Ltd’ to support the online auctioning of 443 lots after it ceased trading and went into liquidation.
Amtech, which specialised in the installation and maintenance service for packaging machinery, offered a range of products and items through the auction, which took place between 20th December – 18th January 2022. The products available to bid on included engineering machinery, food production equipment, hand tools, office furniture, IT equipment, vehicles and food manufacturing machinery.
Working alongside the team at Amtech and the appointed insolvency practitioners, BPI Auctions were able to provide a rapid turnaround, with collections taking place just one week after the sale end date.
The auction gained a tremendous amount of interest, with over 450 registrants. The total sales value was over £145,000, and 98% of all items put up for auction were successfully sold.
David Boulton, Managing Director at BPI Auctions, summarises: “The past 12 months have been challenging for all sectors, not only with lockdowns and restrictions but with the introduction of Brexit and new regulations across industries.
“Selling used and surplus equipment and machinery through online auctions is an effective and efficient method for businesses to recuperate capital from surplus or redundant items and compliments your overall asset recovery process.”