What are the finance options for a struggling company?

Posted on June 24, 2024 | Mark Rolland

Running a struggling company in financial difficulty is certainly challenging. However, with so many different finance options now available that don’t involve the high street banks, be reassured that you can quickly secure the cash injection you need and get back on track.

Choosing the finance product most suitable for your business might take a little time and research. Whether it’s short-term funding you need or a cash flow boost for the longer term, you can tailor it to suit your needs.

So what finance options might be available to your company if it’s struggling with cash flow difficulties?

Article written by Karl Hodson, UK Business Finance, part of the Begbies Traynor Group.

Finance options for a struggling company

Invoice finance

Invoice finance includes factoring and invoice discounting and can be an excellent choice for companies with poor cash flow. This is partially because eligibility doesn’t rely on your business’s credit rating, but that of your debtors.

Funding is based on your sales ledger. For every eligible invoice you issue, you may receive around 90 per cent of the value upfront, typically within 24-48 hours. The remainder is released by the lender, minus their fee, once the customer pays their invoice in full.

A significant benefit of using invoice finance in a company experiencing financial decline is that the facility grows as the business recovers its financial footing. As sales improve, your funding increases alongside the number of invoices issued.

Merchant cash advances

Merchant cash advances help bricks-and-mortar and online retailers that take card payments. You receive cash advances based on the projected value of your card sales with repayments being a pre-agreed proportion.

This means that if sales fall at any time, repayments will also be lower so your company’s finances aren’t stretched. Again, this type of alternative funding doesn’t rely on having a good credit rating because it isn’t a traditional loan.

Merchant cash advances are quick to access, which is another key benefit when your business is struggling. The funding could be used to stabilise your cash flow or perhaps pay upcoming bills and wages.

Asset refinancing

If your company owns valuable hard assets you can leverage their value by refinancing. Sale and leaseback deals involve selling the asset to a financier who then leases it back to you on a fixed monthly repayment basis.

Your rights to use the asset are continuous and you can take ownership again once all payments have been made. Asset refinancing is a good option if you need a large cash injection. You can use it to reinvest in recovery and growth or simply improve working capital availability over time.

Consolidation loan

Consolidation loans are designed to amalgamate two or more existing loans into a single monthly outgoing. Managing multiple loans can be complicated. However, by consolidating you make just one payment per month and don’t have to deal with numerous interest rates and lenders.

It’s important to make sure any early repayment fees on the existing loans don’t override the benefits of consolidating, but this can be a good option to simplify a company’s budgeting and financial management in general.

Applying for finance options when your company is struggling

It’s advisable to seek professional help when tracking down the best funding in this situation. On the other hand, you should not apply for too many loans in a short period as it can damage your business’s credit rating, especially if an application is rejected.

Finding fast access to a source of funding is typically a key issue for struggling companies. However, with a range of options such as these available to you, the business can quickly start to benefit from healthier cash flow.

Article written by Karl Hodson, UK Business Finance, part of the Begbies Traynor Group. Karl is responsible for helping businesses across the UK raise funding for a variety of purposes such as working capital, expansion and capital equipment. He has specialist knowledge of raising finance through invoice and asset-based lending, crowdfunding, loan and equity funds and Government schemes.