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7 signs you need turnaround finance

By Richard Olsen

Despite the best efforts, some businesses will undergo challenging periods – falling sales, restricted cash flow or other financial blockers.

If issues aren’t dealt with promptly, it may lead to the failure of the business, bringing the threat of foreclosure and bankruptcy.

However, there is still the chance to breathe life into your company. You need to turn things around – but this often comes at a cost. Fortunately, there are a number of funding sources under the turnaround finance banner that will support your business and help to rejuvenate performance for long-term survival and success.

Below, we explore the common signs that you might need to focus on a turnaround strategy in order to get back on track.

  • You are experiencing restricted cash flow

Cash flow is the lifeblood of any company, allowing you to meet your financial commitments and avoid disruption. Negative cash flow is one of the first signs of trouble – primarily when the issues stem from reduced revenue or poor cost management.

Boosting cash flow is crucial to prevent financial problems from snowballing as you default on more payments. In a turnaround scenario, it buys you valuable time while you address the root causes.

Fortunately, there are many options on the market to improve cash flow as part of your turnaround strategy.

  • Revenue is falling

Falling revenue typically stems from reduced sales or the loss of an income source (such as a customer contract). It signals a lack of demand for your products and services.

If you are experiencing declining revenue that shows no signs of recovering, it’s a sign you need to do things differently – and fast. Examples of action to take include repositioning your brand in the market, targeting new audiences or adapting your product and service portfolio to suit customer needs.

This requires funding to make it a reality – which is when turnaround finance is vital.

  • There are management problems

A common cause of business distress is poor or unsuitable management. A change in leadership can revitalise a company, especially if the new managers take it in a direction that solves lingering issues and improves performance.

However, there is often a cost associated with bringing in the skills required for a turnaround. You want to secure the best candidates with the experience to lead the business. You’ll also need the funding to support their salaries, plus recruitment and administrative costs.

  • You face credit restrictions

Another common symptom of a failing company is restrictions on credit. You will find yourself unable to borrow, even with credit cards or supplier credit schemes, which could make it harder to meet your existing financial commitments.

Credit restrictions usually result from debt or failure to meet payments, which again suggests there are financial issues in your business that you must take care of.

Turnaround finance may offer alternative solutions to raise funding that enables you to solve the root problems.

  • Your balance sheet looks unhealthy

Your balance sheet identifies your assets and liabilities, with your shareholder equity position showing the net result. If you have more liabilities than you do assets, it’s a sign that the company is in an unsustainable position and may well be insolvent.

An unhealthy balance sheet signifies that you have been running at losses for a period of time and that reserves may well be depleted. It may also highlight poor financial structures within a company. You need to readjust the balance.

External finance is crucial to realising a turnaround strategy that readdresses the balance between assets and liabilities, enabling you to eliminate debt while investing in growth that fuels your company’s value.

  • You’re losing to your competitors

Another cause for failure is competitor overshadowing. If your customers start heading to your competitors, you’ll see sales decline, which is the undoing of any company.

If it happens to you, you need to fight back. This usually means re-evaluating your value proposition to improve on that offered elsewhere – such as adding new products or services to your remit or driving quality.

You may need to rethink your business model to find new ways to target audiences, especially in heavily saturated industries.

Turnaround finance can help support, including funding innovation in your company or implementing new strategies that retain your competitive edge.

  • You require new resources

Creating an effective turnaround strategy is one thing. Next, you need to turn it into reality.

Most turnaround strategies require you to introduce new resources into your business, including equipment, staff, machinery, supplies, etc. All of this comes at a cost which may be hard to cover after a period of instability.

Sourcing external finance will be vital in bringing your plans to life and enabling you to move forward successfully.

Trying times needn’t be the end of your business – but you need an effective turnaround strategy and the funding to empower it to get back on track.

If you are facing challenges in your business, a UKBA advisor will help you identify the cause, design a tailored turnaround strategy and access the finance you need. Get in touch today to find out more.

Richard Olsen | UK Business Advisors (ukba.co.uk)

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