Finding Funding for a Turnaround

Business funding requirements are dynamic, as the business situation and needs change so should the funding mix.  

 

In times of crisis when cash is king any source of additional working capital buys time to survive. However as the turnaround progresses we'd be undertaking a review of your funding and most likely advising a restructure to a more efficient mix of facilities.

 

Regardless of the situation, there's almost always funding available for the business. It just comes at a cost consistent with the perceived risk. Which means we may be tapping into a range of debt and equity funding sources as we progress through the turnaround and the risk diminishes.

 

If we are taking the business into a merger, acquisition, setting up for an IPO we have relationships with a number of firms who are seeking well managed growth opportunities to fund.

Cashflow & Working Capital Management

 Business cashflow is always exposed to some form of seasonal, annual or economic cycle. The financial crisis may be aggravated by these cycles coinciding. 

An ability to forecast the cash position 90 days in advance is ideal as it provides management with a planning horizon. This enables the ship to be trimmed or our external funding to be managed so the business stays on course.

Cashflow management (ie performance to forecast) is central to the turnaround process. Preparation of reliable forecasts flows from a critical review of the working capital needs of the business. 

In the early survival and stabilising phase, the focus is on immediate cash needs of operations. Essentially paying for current products & services with current cash. Once stable we address the past due situations with an agreed plan that's fair and firm. 

Financial Debt & Equity Restructuring

Prudent business no longer has all it's funding facilities with one lender. You are too exposed to "policy" or "target market" changes. Unfortunately they will want out when you need more funds. Too often financing is not well matched to the asset requirements. 

We will review all forms of existing funding, assess the long term and short term (cyclical or project) needs of the business and the use of available securities. There are usually opportunities for restructuring which reduces costs and improves cashflow.

Commercial Loans

Typically these are fixed and floating prime bank (or 2nd teir funder) loan facilities. They usually carry the lowest interest cost because they are well supported with 1st mortgages on business assets and personal guarantees. However they can be restrictive or least flexible during times of growth or crisis.

Debtor Finance & Factoring

Debtor financing (& factoring) is a very useful and flexible funding mechanism. Borrowing capacity grows (and shrinks) with sales. Funding is independent of all other assets and borrowing.  Importantly it can provide an immediate injection of cash into the business.

Leases, Hire Purchase & Rental

These forms of financing are closely matched to the particular asset held as collateral. It's a fast means of securing new production plant and equipment. However, the real cost varies and often back-ended, resulting in a high cash drain to meet payments. This is especially painful when the equipment is under utilised. 

Residential Property Backed Loans

Loans against residential property for investment in business is common source of funding start-up businesses. Interest rates are driven by the LVR (Loan to Valuation Ratio). In times of crisis owners can utilise the assets to support short term (3-12 mth) funding for the business turnaround. Interest can be incorporated into the end of term lump sum loan repayment.

Distressed Financing

After you've exhausted your bankers tolerance and friends /family there are organisations that lend into distressed situations. The interest rate goes with the risk, they lend on character, potential and importantly a credible plan to restore the health of the business. 

 

Typically they'll want to see owners engage professional support and/or some interim management people in place. 

Private Equity Investment

Private equity investors are always seeking opportunities to invest in well managed business. They will fund buy-outs, expansions and turnarounds.

 

A patient equity partner can support management by accelerating growth plans, formalising business strategies, strengthening teams, optimising capital structures, and identifying and negotiating acquisitions and other alliances. All focussed on building sustainable business value.  Read More...

 

We have an established network of funding sources in all categories to ensure the business has access to the right funding mix for its changing situation through a successful  turnaround.