According to the firm, 52 petitions to wind up retail companies have already been filed this year, as of 7 April, as struggling retailers fail to pay their creditors. The lawyers suggest giving retailers a buffer to help them stretch payment deadlines, while they attempt to mitigate the impact of the coronavirus pandemic.
‘Even if the winding up petitions aren’t processed [due to the temporary closure of many courts], they scare off suppliers and possible funders and can have damaging effects on businesses,’ Finella Fogarty, business restructuring and insolvency partner, said.
‘Without supportive suppliers, retailers will struggle to weather the storm.’ She explained that the filing of a petition by one creditor can encourage other creditors to stop funding the business and can result in a freezing of its business accounts.
Few businesses have received finance through the government’s £330 billion loan scheme so far, she said, and there have been ‘significant delays’. Meanwhile, some banks have increased their interest rates on loans to as high as 35%.
Fogarty said: ‘Despite the much-needed government package, the challenge we’ve seen businesses face is that this money isn’t yet going out the door. Businesses are doing everything in their power to deal with their cash flow requirements until the money comes through.’
Karen Hendy, co-head of retail at RPC, said: ‘Whilst the government is taking action to help speed up the process of loans being granted, for many retail businesses the situation is highly time critical. The faster loans can be processed, the better.’
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