Replacement business finance solutions for when you need to replace your existing facilities.
When a funding relationship is coming to an end, for whatever reason, from my experience it’s much better to replace the facility than to have to repay the outstanding monies from cash flow or, worse still, current resources.
Whatever the relationship with your current funder is, if you know things are coming to an end it’s never too early to start the search for the replacement business finance.
1. If the reason is that your business is experiencing cash flow problems:
- Determine your turnaround strategy.
- Document all the proposed adjustments to your business strategy.
- Produce detailed financial forecasts.
- Determine exactly how much new or additional business finance is needed to implement the plan.
- Identify potential providers.
- Approach providers and arrange meetings to present your Turnaround strategy and your business finance needs.
2. If the reason is that your finance provider has given notice of your finance facilities:
- Determine why you have been given notice.
- Accept that any new provider will be asking why you are moving and that they will be asking your existing provider for a reference. This has the potential to create further levels of complexity.
- Try to agree a period of grace with your existing provider to enable you to find new facilities in a timely fashion.
- Speak to a specialist in sourcing replacement business finance facilities.
- Ask the specialist to speak with your existing funder to let them know you are being proactive.
3. If you have lost confidence in your business finance provider and want to move
- Determine the notice period in your finance agreement, and the potential cost of moving before the end of this period.
- Review your options, both in terms of like for like replacement finance providers and alternative sources of finance. For instance you may be paying for a whole ledger invoice discounting facility, but only need funding on a seasonal basis. You could replace this with a selective facility or use an invoice auction site for large invoices without committing to a long contract.
4. If you want to stay with your existing provider but they can’t meet your business finance requirements
- Confirm your exact requirements.
- Consult a specialist in business finance solutions to come up with additional sources of funding that are compatible with your existing facilities.
- Available security will need to be reviewed in that the security pledged to your existing provider will obviously not be available to the additional provider, unless they are prepared to accept a second charge
- Review these additional financing options. It may be that you have an invoice finance facility, and that they are not happy to provide funding against a new customer, due to the terms of the contract or other reasons. We have successfully introduced invoice auction sites on a number of occasions where additional funding has been introduced on an on-going basis. This has been with the support of the existing funder and we have been successful in arranging legal waivers over the debtor in question to enable the transaction to go ahead.
Summary
The key to being successful in replacing your business finance provider is to be proactive, identify how much and what type of finance you need and, where possible, keep the channels of communication open with your existing provider. This strategy will invariable result in Better Outcomes when seeking additional or replacement business finance.
Finding alternative funding
If the continuing lack of availability of funding is affecting your business, please contact us. We are specialists in this field and can hopefully point you in the right direction.
As always, if you have any comments or any of your own experience you would like to share on this subject, please contact me at john.thompson@transcapital.co.uk or on 0845 689 8750.