UKBA logo dark

The role external finance plays in your business turnaround

By Richard Olsen

There is always a risk in business that things won’t work. Many issues may threaten success, including market changes, a poor value proposition, rising costs, bad planning, poor leadership or loss of customers.

Once you witness the symptoms of failure – falling revenue, declining costs and restricted cash flow – it’s tempting to believe the end is nigh. However, not all hope is lost.

It’s possible to turn it around, even when things seem dire. You just need the right strategy and the resources to get back on track. You will also need the funding that enables you to realise your plan.

This is why external finance is crucial when revitalising a failing company. We explore the role of turnaround finance in facilitating your business turnaround.

Why is external finance integral to a business turnaround?

There are many reasons why external finance is required when trying to get your business back on track.

Combatting reduced cash flow

One of the common symptoms of a struggling company is reduced cash flow as revenue falls and costs get out of hand. It’s an issue that can quickly snowball.

As you fail to meet your financial commitments, debt begins to pile up. Even if you have a turnaround plan, you need to get out of the hole by improving cash flow. External finance provides the injection of capital you need to do so.

Fill temporary funding gap

If your problems stem from a sudden drop in income, such as the loss of clients, you need to plug the financial gap. If left unaddressed, it could cause further disruption or get to a point that you can’t come back from.

External finance fills the gap, buying you precious time until you solve the root issues and pick up your income.

Reinvest into your business

Turnaround often requires a re-optimisation of your business. Examples include implementing new processes, upgrading equipment, developing products and services, training staff or adjusting your business plan.

However, this all comes at a cost. By raising external finance, you will cover the costs required to improve the very foundations of your company, so you are able to start generating the desired results.

Fund assets and resources

Another standard part of a turnaround is acquiring resources that enable you to introduce new functions that drive demand or strengthen your existing operations. Examples include equipment, staff and supplies.

If you’ve undergone financial hardship recently, you are unlikely to be able to invest in new resources. This is where external finance again proves vital – allowing you to cover the cost without further restricting cash flow.

Facilitate new leadership

Often, new leaders can breathe life into a struggling business. They are crucial in transforming operations, guiding employees through new processes and creating the conditions of a turnaround.

However, there is a cost associated with recruiting the skills you need. You’ll also want to make sure your company is relatively stable to attract new management. External finance will help you get to this position while covering the cost of salaries and recruitment.

Challenges of turnaround finance

Although turnaround finance is crucial in bringing success back to a struggling company, it’s not always easy to secure.

Firstly, you need to find financial providers willing to support you. A business with a poor financial position or history is less attractive to funders, so fulfilling eligibility criteria will naturally be more challenging.

You might have to search around for longer or be prepared to jump through additional hoops to secure funding, such as supplying security or a personal guarantee.

You will need a strong turnaround plan to convince lenders you will use the funding for good reasons and be able to repay them. Spend time perfecting your strategy to show how you will get your company back on track with a growth focus once the transformation happens.

Finally, your plan must be long-term. Don’t be tempted to seek funding to temporarily plug a gap if you can’t solve the root cause. Doing so will result in more debt, making it harder for your company to survive and leaving you in a worse financial position.

Instead, ensure any finance given is actively used to strengthen the company. 

If you’re unsure where to start with a business turnaround, including raising finance, working with an advisor will help. They will help you design an effective strategy that addresses the underlying imbalances in your company and promotes long-term success.

They will also optimise your funding applications, putting you in contact with the right people to raise finance.

Get in touch today.

Richard Olsen | UK Business Advisors (

Need advice & guidance?

We have advisors all over the UK. Get in touch today for expert guidance and support.