1. As an SME the very worst thing you can do is to ignore your finance problems. Proactive action is always the best way to approach the problem – and to move on to a more prosperous future.
2. If your business is becoming stressed or is in a distressed position – incurring losses, running out of cash or losing key customers – there are a number of options worth looking at, including restructuring your business.
3. Restructuring the operations and processes of a business to create a more successful and dynamic organisation is an option that will usually require your bank’s support.
4. The first priority if your company is in financial difficulty is to focus on your short term cash position: it’s essential to ensure you have it under control, that cash is maximised and sufficient cash/debt facilities are available while the turnaround plan is produced.
5. Your turnaround plan needs to demonstrate the viability of the business, including the actions required to achieve viability and the consequent funding requirement.
6. Control of your short-term cash position and a sustainable longer-term strategy are important prerequisites for a funding package. With these in place, negotiations with the bank and other critical stakeholders have a much higher chance of success.
7. A variety of solvent restructuring options are available, and these days banks are being increasingly flexible in their approach. They are often willing to renegotiate the terms and profile of existing facilities, and in certain cases will enter into debt for equity, or even debt forgiveness transactions, rather than crystallise even greater losses through a formal insolvency programme.
8. If your bank has reached the limit of its funding appetite or is not willing to be flexible, it’s worth contacting a specialist restructuring firm, which will have access to a wide range of alternative sources of finance that may fit the bill to supplement or replace the existing borrowings.
9. Options available to improve your situation include implementing working capital management improvements; raising new finance or refinancing existing facilities; the sale of a division of the business, or realisation of surplus assets. A more extreme option is the accelerated sale of the whole business (AMA), via a share sale, or a sale of trade and assets, with the option to execute this via an insolvency process.
10. Whatever the problem, the sooner you act and the better advice you can source, the greater the range of options that will be available to improve the prospects for you and your business.