The directors of Firstnet Solutions were pumping in money "right up until the end", they have told CRN, after it emerged that the firm owes over £1m to creditors.
Firstnet Solutions went into liquidation in February, citing issues relating to hardware costs and cashflow pressures as the primary causes of its problems.
A report from the directors to creditors, sent out recently, shows that the firm went under owing over £1m to creditors.
'Trade and expense creditors', including resellers and distributors, are owed £615,323.
Firstnet directors David and Angie Cusworth (pictured) told CRN that they ploughed thousands of pounds of their own money into the firm in an attempt to keep it afloat.
"It has been the most difficult thing we have ever had to go through," David Cusworth told us.
"To add to the pain we have gone through, we put every last penny into this from a personal financial point of view; it has hit us in every way possible.
"The reason we were putting money in all the way through this process, right up until the end when it was hard to do so, was to protect the creditors and the staff. They were [held] well above our personal circumstances."
The largest channel creditors are distributors Westcoast and Ingram which are owed £45,919 and £61,846 respectively. A host of other channel businesses are due varying amounts.
Lenders Funding Circle and Barclays are the largest creditors, with both owed over £200,000. HMRC is owed £64,081.
The report says that the prescribed part fund - or the funds available to unsecured creditors - is expected to be nil. One of Firstnet's creditors told CRN that it received a letter last week stating that there are no assets in the business to facilitate a return for suppliers.
According to the directors' report, the company had grown from "strength to strength" supplying hardware solutions, but was faced with cashflow challenges after key suppliers refused to extend credit terms beyond 30 days. This was compounded when several large clients demanded 60-day terms.
To mitigate this, the Cusworths pumped personal loans into the business, of which £72,000 is still outstanding. They also boosted the business' funding from lenders by personally guaranteeing loans and overdrafts, to the tune of £345,177.
David Cusworth said this caused the firm to struggle when dealing with larger customers.
"When you're trying to grow quickly as a small business and deal with bigger customers, which is what you have to step up to do, absolutely it is [difficult]," he said.
"The bigger retail customers that we were trying to deal with were demanding 60 days, so we had a choice of either walking away from the business and not having any business, or trying to make it work, which is what we did.
"If they didn't pay then it extended even more, but the big brand names demand that they get to do that. We could have focused on smaller customers but smaller customers can have delayed payment terms as well."
Despite the finance injections, the business' health continued to deteriorate and in November last year a third-party audit found "a small number of discrepancies" in the company's accounts.
Barclays then restricted Firstnet's funding which left it unable to service hardware and software sales, accounting for two thirds of its turnover, the reports said. At this point the Cusworths injected a further £14,000 of personal funds into the business.
Soon after, one creditor issued a County Court Judgement against the business which "triggered anxiety" in the market from both suppliers and customers.
Following this the directors signalled their intentions to put the business into administration on 19 January, before opting to place it in Creditors' Voluntary Liquidation on 20 February. A third party expressed an interest in acquiring the business during this period, but a deal did not materialise.
The directors' report shows that Firstnet reported a revenue of £1.6m in its last full financial year, with an operating profit of £113,433.
It did not complete its fiscal 2018, but for the period from 1 April 2017 to 2 March 2018 it saw a revenue of £1.2m and an operating loss of £1.3m.
Firstnet went against the grain last year when it opened its own datacentre as part of plans to hit £50m revenue.
In the following September Firstnet merged with Manchester-based Select Data Centres creating Firstnet Group, which comprises two divisions.
Firstnet Data Centres houses the datacentre side of the business, and Firstnet Solutions is the MSP business.
The Cusworths did not comment on their involvement with Firstnet Data Centres, other than to confirm that they are not company directors.
In a confirmation statement filed with Companies House on 27 February the pair are shown to hold 100 ordinary shares in the firm, equating to one third of the business, along with two other shareholders.
Firstnet Data Centres is still trading.
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