Funds Access Lawbot

improve financial situation of your business

HUGO.legal

Are you in financial distress due to Covid? Are you seeeing the possible closure of your business in the near future?Most small businesses find themselves amidst liqudation proceeding loosing it all not knowing that there was a way to avoid the result.Let us help you to address your issues of financial distress before they lead to the bitter end of your business.

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3000 +

liquidations from businesses to date

R182+ billion

available in government funding schemes for SMEs

40 +

Nonbank Institutions for funding

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Funds Access will ask you a few questions about your business

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The robot will tell you if youre truly in financial distresss

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The robot willl then give advice and book you a consultation with a legal practitioner from Gama Attorneys

QA

  • Assets – Anything of value to the business that can be converted to cash or be able to generate cashflow for the business.

e.g., equipment, land/properties, investments

these items are found in the balance sheet of the financial books of the business

  • Liabilities – An entity (something or someone) that the business owes money to, these may include but not limited to loans account payables, mortgages, bonds and accrued expenses
  • Current assets – Assets of a business expected to be sold or used over a period of less that a year (12 months) and are used to fund the day-to-day operations of the business, pay for ongoing operating expenses. Example of current assets include stock/inventory, accounts receivables, current accounts
  • Current Liabilities – Current liabilities are a company’s short-term financial obligations that are due within one year or monies that the company owes and due for payment for less than a year. Example of current liabilities are money owed to suppliers (unpaid supplier invoices) in the form of accounts payable, Interest payable on outstanding debts, Dividends payable
  • Debtors – Person or company that owes money to the business
  • Creditors – Person or company that the business owes money to
  • Cashflow – The term cash flow refers to the total amount of cash being transferred in and out of a company. Cashflow comes from production and sale of goods from ordinary operations, various investment-related activities in a specific period or net flows of cash that are used to fund the company and its capital.
  • Account Receivables – Accounts receivables are funds/monies that customers (debtors) owe to the company for items takes or services rendered without immediate or up-front payment. The services or products are invoiced to said customers. The total value of Account Receivables is listed in the balance sheet of the business as current assets
  • Account Payables – A companies account payables is made of the money it owes to its suppliers for items purchased/services rendered on credit or to its creditors for loan repayments. The balance sheet shows the total amount for account payables under the liabilities.

The Companies Act defines “financially distressed” in section 128(f), to mean that it appears to be: i. reasonably unlikely that the company will be able to pay all of its debts as they fall due and payable within the immediately ensuing six months, or ii. reasonably likely that the company will become insolvent within the immediately ensuing six months

Financial distress in simple terms can be described as a condition when obligations to creditors of a company are broken or honoured with difficulty. If financial distress cannot be relieved, it can lead to bankruptcy

What signs tell that a business is in financial distress?

A number of factors such as:

  • Continuous cashflow problems – the business does not have enough money coming in to pay for its expenses and creditors
  • When a company can no longer pay its creditors (pay back loans)
  • Interest rates on credit payments are very high – large amounts of debt service and high interest rates are an indication of poor finances and affect relationship with the banks as lenders will not trust your viability. You will be labelled as high risk
  • When a business is continuously unable to pay its bills on time – if your business is always late on payments such as rent, water and electricity, collections on accounts receivables it will negatively affect relationships with suppliers and damage your credit
  • Failing margins – when the costs of the business are way too high than the income generated by the business
  • Decrease in sales – when there is little money coming through via product sales or service bookings. An indication that the business is losing customers which may lead to financial troubles.
  • High levels of outstanding receivables – If your business is selling products and services and the profits are tied up in invoices from your debtors that are outstanding, then you don’t have enough cash in your pocket to keep the business running
  • Insolvency is a state of financial distress in which a business or person is unable to pay their bills due to company’s liabilities exceeding their assets. It can lead to insolvency proceedings, in which legal action will be taken against the insolvent person or entity, and assets may be liquidated to pay off outstanding debts. This is the worst-case scenario for a company in financial distress.

Factual (Technical) Insolvency: the liability of the organisation exceeds its assets (balance sheet test – ability to meet obligations from resources).

Commercial Insolvency: the organisation cannot pay its debts as and when they fall due (cash flow test – resources to meet financial obligations).

  • When a company is no longer able to pay off its obligations/debts when they are due (insolvent), it undergoes a process called liquidation. The businesses operations will come to a stop and its assets will be divided amongst its claimants including, but not limited to, its creditors, suppliers, and shareholders.
  • Business rescue is a formal proceeding that a company undergoes when it is considered to be financially distressed. The process aims to restructure the affairs of a company in order to increase the chances 0f the business being able to continues operations on a solvent basis/be able to pay off its obligations to its creditors. A business rescue practitioner will be appointed to temporarily manage the affairs and provide supervision over the operations of the business to ensure the above objectives are achieved.

Your legal assistant in financial matters, Finance Savvy, will help you determine whether or not you are in financial distress as described above by conducting a quick financial assessment by asking you important questions relating to your business’s profits, its solvency, relationship with your debtors and creditors and overall management of your business. Thereafter, if you are financially distressed, we will refer you to a lawyer from Gama Attorneys to assist you.

Banking lawyers focus on the way of which transaction is financed and negotiates credit term agreement and handle contractual issues between lenders and borrowers to ensure that their client’s best position is represented in a financial transaction. Lawyers having knowledge of different funds and lending terms and conditions can advise you on which one best suit your financial position and your business depending on a number of factors. Corporate, commercial financing lawyers can help restructure the company finances so that the funds that have been secured are used in an adequate manner to best service your business .So commercial corporate or finance lawyers will give you advice, help you through the process, the documents, help you with negotiations and even help you after you have secured the funding to ensure that your business survives in the long run.

In many cases when companies obtain funding, they run into issues regarding spending the money efficiently, that they repeat the same mistakes that led to financial distress in the first instance. Thankfully because of HUGO having partnered with efficient & experienced commercial attorneys such as Gama Attorneys, we are able to advise your business, if you choose to, on the most productive manner to allocate those finances for the payment of the business’s immediate debts. Also, to ensure that your business can be productive enough to generate income to prosper and later pay back the aid provided. We encourage making informed decisions like that.

Yes! There are a number of government funding facilities available for small business that provide funding options depending on the type of business you operate, the sector your in and what you need the funds for. These facilities include the Industrial Development Corporation, the Small Enterprise Funding Agency (SEFA), and the National Urban Reconstruction and Housing Agency (NURHA). For specifically small businesses in financial distress due to COVID-19 government has issues funds for employer/employee relief Temporary, Financial Relief Scheme for destroyed, affected or looted workplaces, SARS – Small Business Debt Relief, Finance Scheme Restructuring of SEFA-funded loans Business Growth Resilience Facility Spaza Support Scheme Agricultural Disaster Support Fund, Tourism, Relief Fund, Tax measures Loans. All these schemes are a total of R200 billion dollars made available by government but only just over R25 billion has been claimed