Has your company had a funding application rejected?
Avoid these five common financing mistakes
If your business is struggling for cashflow you'll probably find that it is also a harrowing time for your co-directors and employees.
Without adequate cashflow you may start cutting corners, avoid responsibilities and breaking promises to creditors and suppliers. All of these activities have the potential to lead to a drop in morale, pushing you into an inevitable downward tailspin.
Additional finance could be the light at the end of the tunnel. With sufficient liquidity you could free your business from the stifling grip of your creditors, giving you the vital breathing space you need to effect a turn around.
You might not be aware of all the financial options available to you? Could this be limiting your opportunities to bring your business back to profitability? More importantly, what are the most common pitfalls you could make when seeking finance for a struggling company?
1. Believing you have maximised your available credit
- You're not alone if you utilise some form of finance in your business. Many companies have loans secured against their assets.
- It's easy to assume that you have achieved the maximum asset backed credit if your high street lender has declined providing you with further funds.
- Did you know that in actual fact many lenders are prohibited from lending in even moderately adverse credit conditions and there is a whole sector of specialist brokers and niche lenders that could find you significant extra credit?
2. Thinking all types of lenders are the same
- Everyone is used to dealing with high street banks. You're probably on first name terms with your business manager and you may even regularly see them when out and about at local networking and charity events. They are definitely the first person you approach when your business is suffering cashflow problems as they've helped in the past - but what about when their services come up short?
- Whether you use business loans or asset financing, there are a host of specialist financial institutions that are able to extend credit to you when the high street lenders have already run a mile. These specialist lenders are not bound by the same constraints that stifle and restrict the ability of banks to help you find additional funds. So how do you go about accessing these specialist lenders? The best way is to talk to a broker with experience in this niche sector. They will be able to help you with your application and negotiate terms and conditions with the lender.
3. Working with a tied broker
- You've realised that there may be a whole world of specialist financial institutions able to offer your distressed business credit, but are you getting the whole picture? Many specialist brokers will in fact be linked to one or a small number of institutions and will only be able to provide a narrow perspective of the market, limiting their capacity to assist you.
- Naturally, there is an alternative. Using a whole market broker with access to the whole spectrum of lenders prepared to work with distressed companies is often an eye-opening experience. With various products and packages made up of lending from two to three institutions, they are often able to obtain additional credit where others often fail.
- So at this stage you may even be questioning why you even have to use a broker at all? the answer is because many of these specialist lenders only deal through brokers who they know and trust.
4. Failing to factor in business advice
- Many businesses prefer to tackle their problems on their own. After all, it's your own steadfast attitude and resilient personality that's managed to see you get this far in business.
- During the rush to resolve cashflow problems it's not uncommon for companies to run up debt with creditors leaving important bills with HMRC unpaid. In such situations it is best to enlist the services of a business rescue expert or insolvency practitioner who has experience helping distressed companies come to arrangements with HMRC.
- Did you know working with an insolvency practitioner isn't always a terminal step for your company? Good ones have a toolkit of techniques and procedures specifically designed to give struggling companies more options. From time to pay agreements that allow you to buy breathing space to pay back HMRC to restructuring debt and consolidating all your obligations into one repayment there are a variety of solutions available that could help you out.
- Is it time to ask if your mind set could be stopping your business from getting the assistance it needs to get back on track?
5. Knowing when to give up
- Businesses in distress can reach a final breaking point. If your company is at the end of its life you may not want to admit the journey is over.
- Given that you will have poured a high amount of emotion and personal pride into your venture, it can be too much to admit that your company is actually in a terminal position without chance of recovery. Of course, the end may not always effectively mean the end. Even if additional finance is available for your business there could actually be more viable alternatives.
- One of which is going into an insolvency process to shed debt and transform the business which can be repurchased and launched in a new form. However it is vital that you act quickly before the business is run into the ground and whilst it can seamlessly be transferred without losing customers or important assets.
- To do this legally you will need to work with the right insolvency practice, which is often the difference between successfully resurrecting your business and seeing your company break up.
And finally ...
One company that is able to offer you a service that circumvents most of these problems is Challenge Finance.
We offer a specialist lending service that only deals with the distressed sector of the market and broker agreements with institutions and organisations prepared to take on high risk lending on your behalf.
We also deliver effective business rescue advice, help negotiate time to pay agreements with the HMRC, can package all your debts into one simple repayment with a CVA or guide you through a formal insolvency process where your business can emerge debt free ready to go again.
Distressed companies looking for finance can find out if lending is available within 24 hours - give us a call to discuss your individual situation.