Pre Pack Funding Options

There are various Pre Pack funding options. These may include the purchase of assets using staged payments or different financing options.

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How Company Assets are valued in a Pre Pack

The Pre Pack process involves selling the old company assets to a new business. To ensure that the interests of the company creditors are protected the value of the assets must be correctly assessed.

Company assets include physical goods, tools and machinery or office equipment. However they can also include non tangible items such as websites, client lists and good will.

It is a requirement of SIP 16 that the value of the assets must be determined by an independent professional valuer or advisor. If questioned by the creditors the valuation must stand up to scrutiny.

Pay for Assets using Staged Payments

Ideally the old company assets should be paid for in a single lump sum payment. The directors or shareholders of the new company need to deposit sufficient funds into the new company bank account to cover this.

However the total funds may not always be available from the directors own pocket. If the required sum cannot be made available in full the liquidator of the old company may agree to staged payments.

Staged payments will normally only be accepted after a review of the new company’s cash flow projections. These must show the payments are viable and likely to be made.

When negotiating staged payments the directors of the new company may have to offer personal guarantees.

Pre Pack Funding Options

It may be possible to finance the Pre Pack costs. Given the new company has no trading history it is unlikely that it can secure borrowing from its bank. However the directors may be able to consider Asset Refinancing.

This involves money being lent against the security of the assets being purchased. Clearly this option is only available where the assets are of significant value. However if they were not it is unlikely this solution would be required.

Alternatively the company may be able get a short term loan from a private lender. Generally the cost of this type of finance is high. However the expectation would be that after 12-24 months the company could repay the debt or refinance using a main stream lender.

In order to secure this short term finance the directors will have to give personal guarantees. Additional security might also be required in the form of equity to be returned for a nominal sum on timely repayment of the loan.

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