Refinance Your Company

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Refinance Your Company

If your business is struggling to pay its current liabilities due to slow cash flow or an excessive amount of cash tied up in fixed assets, refinancing can provide the liquidity you need to trade efficiently and bring an end to any legal pressure you currently face from creditors.

A large range of financing options are available for businesses under financial pressure. These include asset refinancing, business lines of credit, invoice discounting and/or factoring, venture capital and more.

If your business is facing cash flow difficulties, contact us. We work with a range of refinancing providers and can help you learn more about the options that are available for increasing your business’s capital and improving cash flow.

What is Refinancing?

Debt refinancing is a process that involves reorganising your business’s financial obligations so that your business has the working capital it needs to pay its creditors, avoid financial pressure and trade efficiently.

Refinancing is commonly referred to as capital release. This form of refinancing involves using your business’s existing assets to release equity and raise capital.

There are numerous reasons for a business to use refinancing. Your business may have a large portion of its asset value tied up its fixed assets, such as equipment and real estate, affecting its amount of operating capital.

In certain cases, a business might turn to refinancing after a financial setback, such as the loss of a key source of revenue, excessive bad debts, a major business disruption or any other type of event that affects its day-to-day cash flow and access to capital.

Advantages of Refinancing

Refinancing offers a range of advantages, both on its own and when compared to other options for raising capital. The major advantages of refinancing include:

  • Refinancing is ideal for businesses that can’t access traditional financing. If your business is financially distressed due to creditor pressure or a cash flow setback, it may not be able to access conventional financing such as a bank loan or overdraft.
    By using your existing fixed assets, refinancing may allow your business to access the cash it needs to continue operating when other options may be unavailable.
  • Your business will receive cash quickly. Asset refinancing is usually a very fast and efficient method of raising cash. This means your business may be able to raise capital rapidly to pay off current liabilities such as accounts payable, wages and taxes.
  • Refinancing provides a great deal of flexibility. Using cash raised with refinancing, your business can purchase equipment and other assets that may not be available via leasing, hire purchase or other forms of financing.
  • Refinancing can be used with other financing solutions. If your business is under significant financial pressure, you may be able to use asset refinancing and an option such as invoice factoring to quickly improve your cash flow and pay creditors.

Disadvantages of Refinancing

As with other business financing options, refinancing also has certain disadvantages. The major disadvantages of refinancing include:

  • Cost. Asset refinancing is typically more expensive than raising capital using a business loan or other line of credit. However, since this type of debt is primarily used in the short term, the higher interest rates may not affect your total financing cost.

Can your Business Use Refinancing?

Refinancing is a good option for businesses that are distressed but financially viable, meaning they currently face financial pressure but still have the potential to trade successfully.

In order to use refinancing, your business will typically need to meet certain criteria. The vast majority of refinancing providers will want to work with a business that:

  • Is viable. If your business is facing financial issues and isn’t viable, meaning it cannot realistically return to profitability, refinancing may not be a good solution. Refinancing is usually suitable for distressed businesses with a path towards financial recovery.
  • Has fixed assets. Refinancing involves using your business’s existing assets to raise capital. Your business will need to have fixed, unencumbered assets in order to make use of most refinancing options.

Other Options for Improving Cash Flow

In addition to asset refinancing, a range of other options are available to help raise capital and improve your business’s cash flow. Some of these solutions use your existing cash flow, while others are loans and cash advances designed to provide instant capital for your business:

  • Turnaround loans. A variety of turnaround loans may be available for your business. In some cases, turnaround lenders may acquire a stake in your business in addition to fees in exchange for providing capital and improving your business’s liquidity.
  • Merchant cash advance (MCA). A merchant cash advance provides your business with a lump sum payment, referred to as a cash advance, that’s repaid via your credit and/or debit card receipts.
  • Invoice factoring. Invoice factoring speeds up cash flow by allowing your business to sell its accounts receivable to a factoring company. Instead of waiting weeks or months for each payment, your business will receive immediate cash flow.
  • Invoice discounting. Similar to factoring, invoice discounting involves using accounts receivable as collateral for a line of credit. This allows your business to borrow against its invoices as it bills each customer and/or client.

There’s no ideal form of financing for every business. Depending on your business’s cash flow, assets and current liabilities, one or several of the financing options listed above may offer the best range of advantage for your current needs.

Interested in Refinancing? Contact Us Now

If your business needs to raise capital to pay its creditors, purchase new assets or just to have more liquidity available for operations, refinancing is an efficient option that can help you to get the cash you need quickly.

As specialists in business recovery, we’ve helped hundreds of UK businesses use refinancing to deal with creditor pressure, fund new equipment or inventory purchases and facilitate long-term turnarounds. Based on your needs, we can connect you with a trusted refinancing partner. 

For more information, advice and to learn about the refinancing solutions that may be available for your business, please contact us now on 0800 9717185 or via email to schedule your free private consultation.

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