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Refinancing for distressed businesses

If your business has become distressed, and is facing insolvency due to increasing inability to meet debt repayments, then you may want to consider refinancing your company. Refinancing can give your business the breathing space it needs within its cash flow, helping you to secure necessary funds without the suffocating repayment terms that take many a business down. 

Here at Stephensons, we have been working with businesses for many years, advising them on their best refinancing options to ensure that their company stays operational, and avoids becoming distressed or being made insolvent.

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Refinancing options

There are a number of refinancing options that are available to UK businesses, such as:

Bank overdrafts

Raising the level of the overdraft on your business bank account is ideal for businesses that need a quick, short-term financial solution. However, you may need to draw up a business plan to show the bank that this is just a temporary measure. 

Factoring

This involves selling invoices to a third party, or a 'factor'. The company sends its invoices to the factor, the factor reimburses the company for the amount specified on the invoices, and then chases up the debts with the relevant parties (for a small charge to the company, of course). 

Asset finance

Evaluating all of your business’s assets, including property, machinery and other items of stock, can help you to review the financial affairs of your company, and identify avenues for refinancing. 

Stock finance

Your company’s stock can easily swallow up finances, however, it is a commodity that can just as easily be appropriately valued, and sold accordingly to other sources. 

Materials finance

Some financial providers can assist your company outside of insolvency, so taking out material finance, replacing trade credit facilities, can help to boost cash flow. 

Enterprise Finance Guarantee loans

Small and medium enterprises (SMEs) may be able to benefit from the Enterprise Finance Guarantee Scheme, which is a government-backed loan initiative, 75 per cent underwritten by the Department for Business, Innovation and Skills (DBIS).

Business angel investments

A 'business angel' is someone who can offer financial backing to a company, in return for equity within that company. Taking an experienced business professional on board in this manner will be good for the business, and not just financially; their knowledge and expertise can bring fresh ideas to the company and encourage growth.

Venture capital

This may not be a viable solution if your business is struggling, as to lodge a successful application for venture capital, you will have to prove that your company has huge potential for future growth. 

Directors loans

Other directors within the organisation may be able to use their business contacts to secure private loans for the company. Often directors fail to follow proper written processes to legitimately provide loans to their businesses and importantly get the loan repaid.

If you run a business, and you are considering your refinancing options, but are unsure as to which avenue is most suitable for your company, get in touch with Stephensons today by calling 01616 966 229.

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