Cash Flow Crisis – Is an Asset Auction the Answer?

When you're running a business operating under tight margins, cash flow may likely be the last lifeline standing. If company assets are in surplus or you’re in urgent need of a cash boost, an asset auction may provide an immediate cash injection. Funds can be raised fast to settle creditor demands, help you meet payroll and keep operations running.

Shaun Barton, a company liquidation specialist at Company Closure, looks at how selling assets through an asset auction can provide an essential burst of cash that can secure the future of your business.  

A Spotlight on Immediacy

When cash flow is at an all-time low, preserving the value of company assets will be a top concern, but how quickly assets can be converted to usable cash will be a greater priority. Traditional asset sales can be time consuming as you advertise, field enquiries, negotiate prices and wait for payment. Meanwhile, your cash flow crisis deepens.

Asset auctions compress this timeline dramatically. From listing the assets to receiving the cash, the process typically takes weeks, rather than months. Asset auctions have an undeniable competitive edge, encouraging urgency and competitive bidding.  Payment terms are clear from the get-go and marketing is handled through established buyer networks, fuelling asset auction success.

Real Costs vs Real Returns

Asset auctions are built for speed, so if generating maximum returns is a priority, you may consider the traditional asset sale route. While an asset auction can secure a competitive payout, the priority is on speed of sale. When considering the real costs of an asset auction, consider that asset houses charge fees and you'll likely achieve less than retail value for your assets; however, the additional costs likely to be incurred otherwise must be considered.

The cost of waiting - Every week you hold onto assets, hoping for a better price, is another week of mounting creditor pressure and potential insolvency action.

The cost of missed opportunities - Quick cash lets you negotiate better terms with creditors. Take advantage of supplier discounts or invest in the parts of your business that actually generate income.

The cost of doing it yourself - Hours spent advertising and showing assets to buyers are hours not spent running your business.

When you factor in speed and certainty, asset auctions often deliver the best net position, even if the gross price is lower than anticipated.

Raising Cash to Strengthen Cash Flow

Raising cash through asset sales works best as part of a broader approach to bringing financial difficulties under control.

Demonstrating creditor cooperation - Taking tangible steps to convert assets to cash shows good faith when you're in discussions with creditors.

Funding turnaround efforts - The cash you raise can buy breathing room to implement proper business improvements.

Supporting formal arrangements - If you're proposing a Company Voluntary Arrangement, demonstrating that you can raise immediate funds strengthens your proposal.

Preparing for liquidation - If the business can't be saved, selling assets through auction can maximise returns for creditors, however, your legal responsibilities as a company director must be considered.

Pulling the Plug on Cash Flow Constraints

One of the most common mistakes is waiting too long to consider asset sales. The best time to auction assets is before creditors threaten creditor action, if not earlier. When you still have control over timing, you can choose the right auction date, properly prepare your assets and set realistic reserves without immediate debt enforcement pressure.

If you're already facing a winding up petition, your options will be severely limited, however, acting quickly can be the difference between an orderly process and a chaotic fire sale.

If you're considering auctioning assets, start by:

• Auditing what you have—including items you might overlook

• Getting professional valuations from auction houses to set realistic expectations

• Calculating how much cash you need and by when

• Seeking insolvency advice if you're in serious difficulty to ensure the auction fits within your legal obligations as a director

• Choosing an experienced auction partner with relevant expertise

While an asset auction won't solve underlying business problems or replace proper financial management, they can convert dormant assets into working capital quickly.

Asset auction provides the breathing room needed to address deeper issues—whether that's negotiating with creditors, funding a turnaround or managing an orderly wind-down. The sooner you take action, the more options you'll have to improve your position, particularly when cash flow is the pain point.