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5 Steps to Save a Business in Financial Distress

Small companies can find themselves facing serious financial problems for any number of reasons but distress does not necessarily mean disaster.

Here are 5 steps worth taking if you are concerned that your company’s cash flow issues are spiralling out of control:

1 – Take a step back

It isn’t easy to avoid a sense of panic under any set of distressing circumstances, but if you can take a step back from the situation you’re in and find a way to analyse your issues more clearly then potential solutions will be much easier to identify.

In the process, you should bring in all your key stakeholders as necessary to help plan out a potential route towards a stronger financial footing. Your analysis should focus on the key issues affecting your company’s finances, such as outgoings, debts and finding solutions to your most pressing financial concerns first.

2 – Liquidate unnecessary assets

When your business is facing up to significant financial problems then it could be that you will need to take drastic action. Liquidating assets that are not fundamental to the way your company operates can help raise cash and open up the prospect of satisfying creditors and overcoming the worst of your debt-related issues.

It is important to be clear in understanding precisely what is and isn’t essential to your business in terms of tangible assets. Arriving at decisions on these points will likely require careful consideration but by liquidating equipment, tools, vehicles, inventory or property assets, you can give your company a potentially vital lifeline as you look to climb out of debt and move towards sustainability.

3 – End non-essential relationships

The reality is that when your company is under severe financial pressures and you’re debts are mounting up, tough decisions have to be made in the longer term interests of your business.

It could be that long-serving employees have to be let go and relationships with trusted suppliers have to end. From the perspective of directors, this is can be a difficult process but, where the alternative is your company going out of business entirely, it is preferable and advisable to take these kind of tough choices before they are out of your hands entirely.

3 – Look into restructuring

Restructuring a business can give it a new lease of life and refocus it on areas of operation that deliver more sustainable returns and a better chance of success. A full scale restructuring plan should incorporate details on your debt management and consolidation strategies, and it should aim to lay out the blueprint of a viable route forward for your company and its finances.

4 – Get specialist advice

If you are struggling with debt management issues or serious cash flow pressures of any sort as a business then it can always help to get specialist advice on the most essential subjects at key moments. Impartial expert advice is always available and for companies in distress, third-party support and guidance for directors can make a huge difference for the better.

5 – Consider all the financing options available

Even if your company’s credit rating is not great or you’ve been rejected for loans by mainstream lenders, there are other finance options available that might be able to help you overcome your funding problems.

Increasingly popular alternative funding solutions include invoice factoring and discounting, while asset financing and refinancing are other options well worth considering. Crowdfunding and peer-to-peer lending are also major growth areas at present, with both markets adding valuable variety to the funding equation for small companies with big ideas.

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