Company Bankruptcy (Liquidation) avoided using Business Refinancing

In the midst of an economic downturn, many companies find themselves at risk of failure because they are struggling with cash flow to maintain their day to day business activities. This may be the case even if there is a strong order book just because customers fail to pay invoices on time as they in turn are trying to preserve cash. There is also the increased risk that the customers themselves may stop trading leaving outstanding invoices unpaid.

Unfortunately, one of the reasons for the current recession in the UK is the lack of available funding through traditional routes such as bank loans and commercial mortgages. High Street banking institutions are currently extremely reluctant to lend because of the huge bad debt risks they have exposed themselves to over the past 5-10 years. Faced with this situation, it is not surprising that many businesses are running out of cash and considering bankruptcy and liquidation.

There are other funding options collectively known as business re-financing which should be considered when a company needs additional working capital (cash) but cannot obtain this through traditional sources. The most significant of these are as follows:

• Asset refinancing
  Raising finance secured on the value of assets (normally plant and machinery) which are owned by the business.
  


• Invoice financing
  Raising finance on the strength of invoices already raised for work carried out. Money is paid up front by the financing company and then collected over time when invoices are paid.
  


• Trade financing
  Finance provided to enable a company to fulfil a confirmed order. The finance company will typically pay suppliers directly and in turn invoice the end customer. Once the customer has paid, adhering to the typical payment terms, the finance company releases any profits back to the business.
  

Derek Cooper is Managing Director of Cooper Matthews Limited, and a member of the Turnaround Management Association UK.

More details about Business Refinancing at coopermatthews.com/business-refinancing.html

Cooper Matthews specialise in Business Refinancing and Business Recovery Services Advice providing straight forward insolvency advice for businesses with financial problems to turn your business around. They have significant experience in working with small to medium sized businesses. Derek's experience of both corporate insolvency and business management puts him in a position to be able to understand the challenges facing businesses in today's economic climate.

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