What is an independent business review?

Independent business review (IBR) come with a reputation – and not a good one. We find that an IBR can, if properly set up and performed, often be a really useful process to clarify thinking and options for the business and its stakeholders.

An independent business review is a report on a borrower commissioned by a lender and carried out by an independent accountant.

Why would a bank request an independent business review?

They are normally done when the lender is concerned about the financial state and prospects of the borrower and its consequent ability to service or repay the loan.  They can also be used in the context of new loans or renewals.

What does an independent business review involve?

Because IBRs involve businesses under financial pressure they are often done by insolvency practitioners, especially if the pressure is high.

It is important that the reviewer has the necessary skills and experience to give confidence in the process.  A lot of banks have “panel firms” that they prefer to use.  That said, if the borrower has a preference then, subject to the competence point, most lenders will be flexible.

Who conducts an independent business review?

An IBR is a serious piece of work which takes time and can therefore be costly.  The borrower usually pays.  It is important to scope the review in such a way as to avoid unnecessary cost – for example by focussing on a particular area of the business or a problem contract – but the review does need to be wide enough to fulfil its purpose.

What are the potential outcomes of an independent business review?

The reason why IBRs are not well perceived by borrowers is that they have a reputation for leading quickly to formal insolvency. That is not our experience. Lenders will look for constructive ways to help (or exit) but formal insolvency is a last resort.

Nevertheless, there will be occasions where the pressures are too intense and there is not enough time for turnaround and then the least worst option will be an accelerated disposal via an insolvency process.  In those circumstance the IBR still provides directors with the comfort that they have properly explored all the options.

How can an independent business review help a business?

We carry out a lot of IBRs for company directors who are facing financial pressure and have concerns about their legal duties and potential personal risks – we call these options reviews.  Also, the way to minimise the risk of a crash into insolvency is to see the problem coming and take advice and action early. Find out how we can help here.