Brighton Holiday Homes boss Neil Stonehill borrowed £1 million from the lettings company before his business went bust, according to an official report.
Mr Stonehill, 54, of Chesham Street, Kemp Town, is being pursued by the administrators of the business who said that he could not repay the cash.
The administrators, whose job is to sell or close the business, expect to recover £154,000 from Mr Stonehill and to start bankruptcy proceedings against him.
The collapse of the business more than a hundred people, businesses and other organisations out of pocket by almost £1.6 million in total.
Those affected include landlords, hen parties, holidaymakers and suppliers who were owed thousands of pounds – as well lenders, the council and the tax authorities.
Mr Stonehill and his wife Michell Stonehill, 47, set up the holiday lettings company – based in St George’s Road in Kemp Town – in September 2008 and started trading in April 2009.
On Tuesday 28 May, the company emailed dozens of customers to say that the business had ceased trading and that their bookings could no longer be honoured.
The lettings firm had cash flow problems even though those making bookings were expected to pay six weeks in advance.
According to a statement filed with Companies House on Wednesday (14 August), the plug was pulled by the company’s main lender, Funding Circle Trustees Limited which was owed £461,000.
Despite being a secured creditor, the lender looks likely to receive only about £35,000 from the assets of the firm.
Funding Circle, a peer-to-peer lender, appointed Paul Zalkin and Maxine Reid as the joint administrators, from Quantuma, the accountants, in Frederick Place, Brighton.
Even more is owed to online card payment company Worldpay, with £542,000 outstanding, while another business lender, Nucleus Cash Flow Finance, is owed almost £60,000. Both are unsecured creditors, likely to have lost almost every penny.
Dozens of landlords are owed almost £400,000, according to the administrators’ statement.
It also said that eight staff and former staff were owed £5,000 – the same sum as hen party specialists Butlers with Bums.
The firm owed £5,550 to Brighton and Hove City Council and £60,000 to Revenue and Customs in tax and national insurance.
The administrators’ statement said: “The company grew quickly grew from a business with turnover of around £900,000 in 2009 to over £2,600,000 in 2013.
“The business has generated a profit in all but one of its full years of trading.
“However, cash flow was an issue for the company and by 2016 the business started to become reliant on loans in order to support its day-to-day trade.
“By 2017 the level of trade had continued to fall and the director (Mr Stonehill) implemented cost-cutting measures.
“National competitors such as Airbnb were driving both customers and landlords away from independent holiday letting agents such as the company in view of the potential cost savings and flexibility.
“Cash flow continued to be an issue for the business and in October 2017 the company secured a loan of £474,731 from FCTL (Funding Circle Trustees Limited).
“In December 2018 the director sold one of his properties and placed the sale proceeds into the business in an attempt to reduce the company’s cash flow pressures.
“It should be noted that the balance of the overdrawn director’s loan account at this stage was significant.”
When the administrators started investigating the collapse of the business, they found that Mr Stonehill had taken out £1,024,281 through the director’s loan account.
They said that these were the company’s funds “utilised by the director for his personal benefit over and above the director’s salary or any declared dividends”.
The administrators’ statement added: “On (Friday) 12 July the joint administrators served the director with a statutory demand in the sum of £1,024,281.
“This demand gives the director 21 days to settle this balance in full.
“Following a meeting between the director and Paul Zalkin, one of the joint administrators, it was apparent that the director does not have sufficient cash reserves to clear his liability to the company.
“The joint administrators will therefore look to petition for the directors’ personal bankruptcy.
“Once bankrupt, the joint administrators’ claim will rank equally with all other unsecured creditors of the director in his bankruptcy estate.”
LIKE WHAT WE DO? HELP US TO DO MORE OF IT BY DONATING HERE.