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Why dormancy creates an underwriting gap
A lender's core question is always: can this company service its debt from its own trading cash flows? A dormant company, by definition, has no recent trading cash flows to assess. Even if the company has a clean credit file — which dormancy usually preserves — the absence of current revenue creates a gap that cannot be filled by historic accounts that may be several years old.
What pre-dormancy history contributes
If the company traded for several years before going dormant, that history shows the directors' operational capability and the viability of the business model. It is not worthless, but it depreciates rapidly with time. A dormancy period of more than two or three years means the market context, the customer base, and the cost structure may all have changed substantially.
Lenders will typically want to see at least three to six months of post-reactivation trading statements before advancing a material facility, unless the borrowing is secured against hard assets and the personal guarantee position is strong.
Reasons for dormancy matter
Dormancy arising from a deliberate pause — a director who stepped away for health reasons, a business mothballed during a market downturn, or a vehicle kept in reserve for a planned project — is a different story from dormancy following financial difficulty. A lender will want to understand which situation applies. If dormancy followed losses, creditor pressure, or personal insolvency of a director, that context must be disclosed and will require careful handling.
Strengthening the post-reactivation application
The strongest positions are those where the company can show: confirmed contracts or purchase orders at the point of reactivation; a director with a demonstrable track record in the sector; and either a charge over identifiable assets or a director guarantee backed by personal assets.
- Post-reactivation bank statements showing early trading activity
- Contracts, purchase orders, or letters of intent from customers
- Explanation of the dormancy period and reasons for reactivation
- Updated management accounts since trading resumed
Frequently asked questions
Does a company that was never dissolved need to re-register before borrowing?
No. A dormant company that was never struck off remains a legal entity and can resume trading and enter contracts, including a loan agreement, without any re-registration process.
Can we use the company's old customer relationships as evidence of post-reactivation revenue?
Previous customer relationships can support a credible narrative, but lenders will want to see confirmed current orders or agreements rather than historic goodwill. A letter of intent from a returning customer carries more weight than a general assertion.
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