Working through a liquidity crisis

Should you trade through a liquidity crisis? A liquidity crisis will occur when a business has a lack of cash required to grow, can’t meet its debts when they are due or pay for day-to-day operations causing it have debt problems. Some businesses choose to “trade through” a liquidity crisis in the hope of finding additional cash flow and avoiding the need for debt management advice. This often involves delaying payments to creditors, granting security, taking additional borrowings, selling assets and improving receipts from customers. When a liquidity crisis occurs it is vital that the stakeholders accurately and objectively take debt advice to see whether the business is viable and ultimately can succeed with the injection of further cash to stave off insolvency. The decision whether to “trade through” a liquidity crisis or become insolvent is quite possibly the most difficult and complex decision any management team have to take.