There are many different reasons that a company may find itself facing financial difficulties. Internal issues, such as poor bookkeeping or overtrading can all have a huge impact on a company’s success. In more rare cases, external factors may also play a role, such as changes to government regulations or a nationwide financial crisis. In short, it’s not uncommon for companies to find themselves racking up debt and struggling to pay their bills on time. If you recognise these issues in your own company, it’s important to be proactive in addressing the problem, rather than leaving it to escalate. Luckily, there are many effective business rescue tools that can be used to restore struggling companies to profitability. One of these tools is corporate refinancing.
What Is Corporate Refinancing?
Corporate refinancing is an effective business rescue strategy that involves reorganising a company’s financial obligations by replacing or restructuring existing debt. Refinancing debt helps businesses to secure more favourable interest rates, whilst giving them the breathing space that they need to negotiate realistic repayment terms.
There are different types of corporate refinancing that UK companies can use to help recover their financial position. These include the following:
Enterprise Finance Guarantee Loans
The Enterprise Finance Guarantee (EFG) is a government backed loan scheme that encourages additional lending to small and medium-sized businesses. EFG may be an option for companies who have been refused a normal commercial loan due to a lack of security or proven track record.
Business Angel Investment
Another potential option for corporate refinancing is a business angel investment. An ‘angel investor’ is someone who invests their own money in a business in return for a share of the equity. Taking on an experienced business professional like this is a good way to get financial backing whilst also making the most of their knowledge and expertise.
Director Loans
In some cases, there may be directors within the business who can use their own private loans for the company. If this method of corporate financing is being used, it’s important that professional guidance is used to protect the liability of the directors involved. This is essential when directors are using personal funds to supply business refinance loans.
Venture Capital
Venture capital is a form of financing provided by external investors to companies with a realistic chance of growth. In order to use this form of corporate refinancing, the company will need to be able to demonstrate that it has realistic potential for growth.
Stock/ Asset Finance
Another key aspect of corporate refinancing is reviewing all assets and stocks within the company in order to ascertain the best avenues for financing, looking at how these can be used to raise funds. Refinancing assets and stock can be a quick way to obtain working capital.
Factoring & Invoice Discounting
This debt refinancing tool involves selling invoices to a third party known as a ‘factor’. The factor supplies funds for the invoices and then chases up the debts with the relevant parties for a small fee.
Corporate refinancing is just one rescue tool that can be used to assist struggling businesses. If your company is struggling to manage its liabilities, please don’t hesitate to get in touch with our expert team at Ballard Business Recovery for confidential advice. We can tailor a company rescue plan to suit your company’s individual requirements, and help you get back on your feet again.
