There are options to financing turnaround, in a distressed business, that you can consider. They are outlined in this Lesson.

Negotiating Financing Turnaround Payment Terms

Your finance falls into two categories; short term and long term.

Short term finance:

  • Credit card debt
  • Overdrafts
  • Short-term bridging loans

Typically, this short-term money has a very high interest rate. This can make a significant impact on your business. But if survival is at stake, it can be useful.

If your business turn around is going to take some time:
Convert some of the expensive short term debt into longer, more economical, debt.

Suggestion: a one year loan to replace your shorter term debt.

  • The approval and the interest rate you pay will depend on the general health of your business
    and
  • Other assets you have that can be used as collateral to the loan.

Longer term finance:

  • Change large monthly payments to once a fortnight smaller payments.
    • Ironically, this will dramatically reduce the amount of money you re-pay to those loans over their life time,; but will not help much in the short term; other than it is a smaller amount of money to find each period.
    • For greater detail go to the Skills Module (included in this Campaign): SM6.5 Profit Autopilot “Piggy Banks”
  • Equipment leases for office equipment, vehicles, tools and plant:
    • Try to re-negotiate these leases.
    • Convert them to some other form of debt or get a “holiday” from the payments.

Leases are complex financial calculations, you may want to get the advice of a finance broker or accountant to assist you handling this.

Factoring for Financing Turnaround

Are you experiencing a slow payment of money that is owed to you?
There are solutions.

Example:
In the building construction game – it is common to outlay money for labour and materials prior to getting a partial progress payment on the construction.

Sell this debt collection to “Factoring Agents”.
Factoring Agents look at the quality of your Accounts Receivable and pay you so many cents in the dollar immediately.

Benefits:
You will have a steady cash flow.
Is a solution where your cash flow is sluggish or comes in lumps.

Negatives:
Factoring will cost you money for the provision of the service.
It does not insulate you from debts that actually go “bad” and are never repaid.

Do not use:
When the debts are easy to collect.
As compensation for failing to collect your debts on time.

Now, you should consider if there are any options for financing turnaround that you should consider at this point.

For more help understanding any issues relating to this Section of the Turnaround90 Campaign, use the 12Faces Diagnostic System to drill down to root causes of problems and find our suggested Treatments.

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