Products that finish companies

Daily and weekly sweeps

A merchant cash advance, or any product that collects a percentage of card takings or a fixed daily amount from the current account, prices risk by taking cash before you can use it. Quiet Tuesday still gets collected. A refund week still gets collected. Wages still have to go out.

The sales story is "flexible, aligned with your takings". The file story is: the operating account is no longer yours in any practical sense. You are running a business on the residual after the sweep. When the residual cannot pay VAT, the next broker offers a second sweep to "cover HMRC". That is how stacking starts.

If collections are daily, ask for a one-page table: typical week, quiet week, VAT week, wages week. If the product only works on the typical week, it does not work.

Stacking

Stacking is two or more short-term collectors on the same cash. Each provider knew, or could have known, that another collector was already there. Each still took a fee. The company now has a payroll, a landlord, HMRC, and two sweeps, and the directors are being told the problem is "cashflow" as if cashflow were a personality trait.

A refinance that lasts has to replace the stack, not sit on top of it. A warehouse that offers to "restructure" by adding a third product is not restructuring. Read Stacked debt and Warehouse brokers.

Short-term bridging used as working capital

Bridging has a job: a defined exit, in a defined number of months, usually a sale or a refinance that is already in train. Using bridging to pay wages and VAT because it was the only same-day signature in the room is how a property product becomes an insolvency.

Ask: what is the contracted exit, who is the take-out lender or buyer, and what happens if that exit misses by 30 days. If the answer is "we'll extend" or "we'll renew", you are looking at working capital dressed as bridging, with default mechanics designed for a property deal.

The renewal that is not an exit

You have paid collections for months. The balance is not gone. They offer to "renew". There is a new fee, often on the remaining balance, sometimes on a slightly larger line. You sign because the alternative is default interest and a demand. You now owe more than you did on day one of the renewal, having already paid a large multiple of the original advance in collections.

That is not a working-capital relationship. It is a subscription to the debt. The only adults in that conversation are: pay it down from trading without a new fee, refinance it onto a structure that can last, or take insolvency advice. A fourth renewal is not a plan.

Invoice finance that takes the company with it

Invoice finance is a real tool. The version that finishes companies is the one that takes:

• assignment of the whole ledger, not a selective book;
• a reserve that never comes back in practice;
• the right to notify your customers on day one, which some directors only discover when a customer forwards the notice;
• an all-asset charge and a continuing personal guarantee on top, so there is no residual business if the ledger is slow;
• concentration limits that trip default just when your best customer stretches to 60 days.

Ask who notifies debtors, what happens on a dispute, and whether the personal guarantee is still wanted if the ledger is clean. If they want the ledger and the house, they do not like the ledger as much as the pitch said.

Same-day shops

Speed is the product. Underwriting is a bank statement and a pulse. Security is whatever they can get you to sign while wages are on Friday: all-asset, personal guarantee, sometimes a second charge they will "register later". The price is in the collections, not on a headline.

Same-day has a use — a contracted, short, defined hole, with an exit you can point at. Same-day as a way of life is how limited companies quietly become unlimited.

Sale-and-leaseback at a desperate price

Selling the premises (or the plant) to a connected or opportunistic buyer and leasing it back can be a legitimate refinance. Done in a panic, it is a transaction at an undervalue waiting for a liquidator, especially if the buyer is connected and the price was the first number that funded the sweep. Directors who sign this without independent valuation and insolvency advice are writing the next section 238 claim themselves. See Directors in the danger zone.

Personal security on a short-life product

A personal guarantee, or a charge on a home, on a facility measured in months, is the tell that the lender does not believe the company's cash will repay them. They are underwriting you. That can be rational for them. For you it is a decision to put the family's assets behind a product that was sold as working capital.

If you are going to do that, do it with a solicitor, on a structure that can last, with a release mechanism you can explain in one sentence. Do not do it at 16:55 on a warehouse email.

How to recognise cost without a headline rate

House policy here is strict, and useful: nobody on this site is quoting you a price. You can still see cost.

• You repay a multiple of the advance over a few months, not a term that looks like a working-capital year.
• Collections continue on quiet days.
• Fees are deducted from the advance, so you never see the headline amount in the account.
• A "renewal" adds a fee without clearing the old balance.
• Default is expensive in ways the broker did not put in the email.

If you cannot draw, on one page, money in, money out, and money left for VAT and wages, you do not understand the product. Do not sign it.

What to replace them with, in principle

Not a named lender. A shape: one collector, or none; a term that matches the use of funds; security that is proportionate; an exit that is not a renewal with the same shop; HMRC on a Time to Pay you can actually keep. If that shape does not exist for this file, the honest product is insolvency advice, not a faster sweep.

Strata packages distress-refinance files built to that shape — one collector or none, a term that matches what the money is for, security that is proportionate, HMRC on a Time to Pay you can actually keep. We do not lend, and if a lesson here sounds like a recommendation of a specific facility, it has gone wrong. The recommendation is to stop adding the products that finish companies, and take the file to a packager who will build the shape properly.