Commercial finance can be tricky to come by in turnaround and insolvency situations. In general, lenders are unwilling to take on the extra risk associated with these types of businesses. As a result, many companies in financial distress find themselves struggling to secure the financing they need to keep their businesses afloat.
There are, however, some options available for companies in this situation. One is to work with a specialist lender that specialises in providing commercial finance to businesses in distress. These lenders are typically more willing to take on the extra risk associated with these types of businesses.
What is Turnaround Finance
Turnaround finance is a type of financing that is typically used to help businesses that are struggling financially, this form of financing is intended for businesses that are in financial distress. The goal of turnaround finance is to provide the business with the funding it needs to make necessary changes and improve its financial situation.
In most cases, turnaround finance is used to fund operational expenses, such as payroll or inventory, as well as to make changes to the business model that will lead to long-term financial stability. In the UK, there are a number of sources of turnaround finance, including asset based lending such as invoice finance, private equity firms, private investors, alternative finance or business loans.
Types of Turnaround Finance
The following types of turnaround finance are available to businesses in the UK:
1. Asset Finance
Asset finance is a type of business finance in the UK that allows companies to borrow money to purchase or lease assets such as machinery, vehicles or equipment. The asset is used as security for the loan, which means that if the borrower defaults on the repayments, the lender can repossess the asset. Asset finance can be used to fund a wide range of business investments, and it can be an important source of funding for small businesses in particular.
There are a number of different types of asset finance available, and choosing the right option will depend on the specific needs of your business. However, asset finance can be an extremely useful tool for businesses of all sizes, and it can help you to invest in new assets without tying up large amounts of capital.
2. Invoice Finance
Invoice finance is a type of funding that allows businesses to access the value of their unpaid invoices. It can be used to cover short-term costs or to free up working capital. Invoice finance is typically provided by specialist lenders, and businesses can usually access up to 85% of the value of their invoices.
The main advantage of invoice finance is that it can provide a quick injection of cash into a business. It can also be flexible, as businesses only need to draw down funds when they need them. Additionally, invoice finance can help businesses to improve their cash flow and credit rating. In the UK, invoice finance is not regulated by the Financial Conduct Authority (FCA).
3. Private Equity Finance
Private equity finance is a type of investment that involves the sale of shares in a company to a small group of investors. The shares are usually sold at a discount to the market price, and the investors hope to make a profit by selling them back to the public at a higher price.
Private equity finance is often used to fund start-ups or early-stage businesses, as it can provide the capital needed to grow the business or if the business finds itself in distressed. In the UK, private equity firms are regulated by the Financial Conduct Authority (FCA).
4. Private Business Investors
Private business investors are individuals or organisations that invest in businesses, usually in exchange for equity. Private investors typically provide startup capital or growth capital to businesses in exchange for a stake in the company. Some private investors are known as venture capitalists, while others are called angel investors. Private investors can bring valuable expertise and experience to a business, as well as much-needed financial resources.
In many cases, private investors are essential for businesses to get off the ground and grow. However, it is important to remember that private investors will also expect to see a return on their investment, so businesses must be careful not to take on more debt than they can realistically handle.
5. Alternative Business Finance
When it comes to business finance, there are a number of alternative options available. One popular option is trade credit, which is credit extended by suppliers to businesses for the purchase of goods or services. Trade credit can be an attractive option for businesses because it often comes with extended payment terms, which can help to improve cash flow.
Another alternative option is invoice financing, which is a type of short-term loan that is secured by the outstanding invoices of a business. Invoice financing can be a helpful way for businesses to get quick access to cash, and it can also help to improve account receivable management. There are a variety of other alternative business finance options available, and the best option for a particular business will depend on the specific needs and circumstances of the business.
6. Bank Loans
Business loans from banks can provide the financial boost your business needs to grow. Whether you’re looking to expand your operations or cover unexpected expenses, a bank loan can give you the flexibility and funds you need. But how do you qualify for a bank loan? The first step is to develop a strong relationship with your banker.
This means frequently updating them on your business’ progress and sharing your plans for growth. Once you have a good relationship established, you’ll need to provide financial statements and proof of collateral to qualify for a loan. Bank loans typically have lower interest rates than other types of loans, making them a more affordable option for businesses. If you’re looking for a way to finance your business’ growth, a bank loan may be the right choice for you.
Benefits of Turnaround Finance
Turnaround finance brings with it many benefits if it is used as a short-term funding tool for businesses undergoing turnaround solutions. It can provide the capital necessary to pay off creditors, restructure the business, and give it time to recover. Turnaround finance has a number of advantages over more traditional types of funding, such as high street bank loans or peer to peer funding.
Te benefits are as follows:
- Speed of implication – it is typically easier to obtain turnaround finance than other types of funding.
- Variety of uses – turnaround finance can be used for a variety of purposes, such as paying off creditors, restructuring the business, or even acquiring new assets.
- Cost of borrowing – it can be obtained at a lower cost than other types of funding. This is because lenders are typically more willing to negotiate on terms when they know that the business is in financial difficulty. As a result, turnaround finance can be an extremely valuable tool for businesses in the UK that are facing financial difficulties
Eligible for Turnaround Finance?
To access turnaround financing, your business generally needs to be in a financial distress and undergoing a business turnaround process. This can mean that many financing providers are selective about the businesses they’re willing work with because there’s so much risk involved for them and their customers alike when providing this service which makes it difficult as an entrepreneur trying desperately enough not just get funding but also find trustworthy partners who will help grow your company.
- The business needs to be financially viable.
- Willing to implement recommended changes
- Have a good management team in place
Turnaround Finance expertise
If you find your business in a turnaround situation and need finance to fund it, we can find you the finance you need. Our expertise in turnaround finance is second to none in the UK, having financed business with many different stories.
To get a quotation for turnaround finance simply complete the online enquiry and one of our team will make contact and discuss your needs.
Seasoned professional with a strong passion for the world of business finance. With over twenty years of dedicated experience in the field, my journey into the world of business finance began with a relentless curiosity for understanding the intricate workings of financial systems.