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A guide to debt finance and refinancing

6th December, 2023
Robert Moore

Written ByRobert Moore

Marketing Manager


Rob has over a decade of experience in web and general marketing. He has extensive knowledge of the Insolvency sector and has helped many worried directors with their questions.

Rob is now working with the Board at KSA Group Ltd to develop strategic marketing programmes to support the business plan and drive more company rescues.

Robert Moore
  • Are you running out of cash waiting for the business to make a profit or can’t collect money in fast enough?
  • Refinancing
  • Bank Overdraft
  • Enterprise Finance Guarantee Scheme
  • Factoring & Invoice Discounting
  • Asset Refinance or Asset Based Lending (ABL)
  • Stock Finance (very limited availability)
  • Business Angel Investment
  • Venture Capital
  • Directors’ Loans
  • New Finance products
  • Crowdfunding
  • Peer to peer finance
  • Recovery Loan Scheme
  • Short term loan providers
  • Credit card finance merchant loans

Are you running out of cash waiting for the business to make a profit or can’t collect money in fast enough?

Almost all businesses need to go through periodic refinancing exercises, whether replacing bank facilities, renewing overdrafts, obtaining bank term loans, EFG loan guarantees scheme loans, factoring/ invoice discounting or capital expenditure requirements. This is normal business practice.

This is especially important following the Coronavirus Pandemic when companies have had unprecedented changes in their business environment.  There are government supported loans in the form of the Recovery Loan Scheme

Raising working capital is an important plank in any growth plan. Since the 2008 banking crisis and new rules being imposed raising finance has become more difficult and more hassle.

Where a company has encountered a significant downturn event or is under pressure, then the directors must consider whether raising further finance against assets is the solution to their problems. As the current market for business changes and evolves almost daily, we cannot provide an exhaustive list of the financial products available but we give a simple guide to the options available to you below.

We assume that the business is not a prime candidate for lending and that it needs working capital.


Remember, this section is not designed for ordinary business financing solutions, rather it is for companies under pressure, who need to find adequate working capital.

Consider the products, weigh them up against the circumstances you find yourself in and decide. If you want help to decide and find the most appropriate suppliers of finance, please contact us. We know and have access to dozens of providers of these products and can point out the pros and cons of each.

After all that are you confused? Want help to decide what is appropriate? Contact us – call us FREE on 08009700539 or fill out the contact us form.

Bank Overdraft

It may be possible to obtain temporary increases in facilities from the bank although due to regulations (BASEL III) banks are keener to convert overdrafts into loans. If the problem can be demonstrated to be short lived the bank will often want to try and help. If the problem looks more deep-seated the bank may want more investment from third parties (you). Prepare good information, your team’s arguments and talk to the bank – early enough. Don’t wait until you cannot pay PAYE and VAT as this is a sign that the company is probably insolvent. Rarely will banks allow extension of facilities for this purpose.

If, however, your business looks like turning the corner you could offer to provide additional personal security such as personal guarantees (PG) secured against your home. If you are not prepared to back your hunch with a PG, then ask yourself why should the bank provide money at increased risk to the bank?

Decision making process is usually short – if you have good information to give the bank. The existing relationship is very valuable – banks don’t like losing customers. It may ask for more detailed work to be done on the figures, (despite the cost) this can a be valuable exercise. It may help pave the way to other financial products from the bank in future.

If the bank cannot see how its money can be repaid (serviceability) or cannot see how it can get the money back in the event of liquidation (security) they will not lend. Ill-prepared requests for funds will be looked upon less favourably. The bank may want a third view and ask for investigating accountants to examine the business. It may be more costly than existing finance.

The bank will probably want more security from the company and the directors – personal guarantees may be demanded or increased if already in place.

Enterprise Finance Guarantee Scheme

A government backed loan scheme to assist SMEs (small to medium enterprises) with working capital requirements. Typically the DeBIS (Government Business Department) underwrite up to 75% of the loan. Banks vary in their approach to the scheme but the DeBIS is actively encouraging its use.

It can be good value but is never quick to raise this type of loan. The investment criteria are perhaps less stringent than non-guaranteed facilities. Capital and or interest holidays can usually be agreed. For distressed companies this can be a lifeline while they return to profitability.

If you need to raise this type of loan remember it cannot be used to service arrears of VAT and PAYE. Being behind with tax payments  is likely to lead to a  rejection of any proposal for an EFG loan.

Not all applications are approved of course. If the company is clearly distressed the bank and or the DeBIS may reject applications. Can you raise enough to provide a solution and adequate working capital whilst you return to profit? Can you service the loan? Merely creating more debt is not a solution where radical surgery may be needed. Also remember that almost always the loan is backed up by a personal guarantee.  If the bank can’t get all the money out of you then they can then revert to the government to make up the shortfall.  Think of a CVA and restructure the company’s fixed and viable costs AND improve working capital.

Factoring & Invoice Discounting

You essentially sell the debtor book (customers that owe your company money) to a factoring company who then provide the company with working capital advances (effectively a loan) against that asset. They will provide from 50-95% advance against the debtor book and charge around 0.33% to 2% depending on the number of invoices, the quality of the debtor book and how much work is required.

Usually all your future invoices pass through the system and this sharply improves cashflow. Not any more seen as “lending of last resort” factoring is a very powerful tool and there are some excellent factoring companies providing multiple working capital products to tens of thousands of UK businesses nowadays.

Some companies can now even offer finance based on one invoice! Call Keith Steven if that product would be helpful to you. This can be used, for example, if you are selling some products to one new customer. The provider just looks at the history of the debtor. Talk to KSA if you need a new factor, specific spot factoring or just some guidance.

Factoring means that the customers know you are borrowing money against their invoices from you. Confidential invoice discounting (CID) usually means this lending is discrete and the customer doesn’t know.

If your debtor control is poor this can help. It is an extremely flexible form of finance – the facility can rise and fall as your needs dictate. If the company is under pressure and your sales are growing it is a vital tool. Finding the right factor can lead to much more efficient use of your assets and the ability to plan production or activity – thereby creating improved efficiency.

If your business is growing this can grow with you, if sales are shrinking it can be a flexible facility but see below.

Concentration in one or two customers can cause difficulties. It is perceived as expensive – but it is providing the commodity you need – money. Most banks have a factoring division – they may not be suitable for your business – shop around. BUT in the current climate big bank factoring facilities are less flexible than the small more nimble factoring companies.
Any bank overdraft is normally repaid from the advance from the factor (the bank’s main security is sold to the factor). If you have very low margins or your debtors pay very slowly (more than 80 days) it is not generally suitable.

Talk to Keith Steven on 07833 240747 if you need to find new flexible factoring or CID facilities

Asset Refinance or Asset Based Lending (ABL)

Most companies depreciate their assets faster than the value of those assets fall. Therefore, there are often “unencumbered” assets to lend against. The assets of the business form collateral for the lender to secure themselves against.

Assets can include, property, machinery, stock (see stock finance). Used in conjunction with, say, factoring, this method can provide a package of new finance to overcome distress.

It is usually a very quick method, access can be through commercial finance brokers or other contacts. Contact us by email for help if required. Where a short term crisis (say a large bad debt) has occurred this method can help the company round the problem very quickly by efficiently using its assets to raise cash. Better quality assets such as land and buildings can attract good rates of interest. In 2020-21 there are many new players offering refinance and asset based lending at good rates.

Raising finance this way is not cheap. Where the company has unencumbered assets it is tempting to raise cash against them but remember NB: If the crisis is longer term can your company service the debt repayments?

Call us for a CVA now! Costs vary but rates of interest on refinancing assets (i.e. where previous debts are repaid and fresh advances made) can be as high as 30%. The value of assets is established by the lender – it is never as much as you expect.

Stock Finance (very limited availability)

A form of asset finance. Where the business carries stocks that are easily value-able and resold (such as retail or wholesale or where manufacturers hold stock for clients) then stock finance can be raised. The value of stock is usually much less than that on the balance sheet and lenders lend according to their own valuations.

As part of a package of measures stock finance can be useful. It can often be flexible and longer term advances can help cope with trade cycle ups and downs. It can be relatively quick to organise.

It can be costly and the stock will never be worth as much as you think. The security may be difficult to assign. If the bank has a debenture in place any finance raised may be taken by them to mitigate the exposure anyway.

Business Angel Investment

The classic UK equity gap problem is getting worse. Too small for venture capital and too big a risk for the bank – where to turn? Angels can provide a mixture of loans and equity to distressed or struggling businesses. Most come from a business background and have lots of experience. They usually take a longer term view and can greatly assist the directors grow the company.

With bags of experience an angel can be just what the growing or struggling company needs. Chose carefully and the relationship can be very fruitful. The funds can be flexible and inexpensive. Further rounds of funding can be available. The fact that an investor is putting money in can also help persuade the bank to increase funds available.

Chemistry can be difficult – they are going to be involved long term therefore will take time choosing their investments. Equity: they will want to hold shares in the company and the depth of the distress or pressure will determine how big a slice they require. Paucity: there are thousands of angels but finding an appropriate angel, convincing them to get involved and getting finance can take many months. Control: many angels will want control at board level.
BUT isn’t it better to own say 75% of a company with value than 100% of nothing?

Speak to Keith Steven on 07833 240747 if you think this is a product that you need.

Angel investors often want to see debts restructured either through a CVA or a pre pack. Be warned they never want to risk their money to plug a gap for tax payments for your company, if the company fails they may pick the assets up is a common view.

So ask yourself should the company be restructured with a  CVA and hive out BEFORE any new funding comes in? (click links to read more on these powerful tools).

Venture Capital

Most small businesses in trouble are NOT suitable for Venture Capital. VCs invest in around 1 in 1,000 applications for finance and unless there is a huge growth potential and an almost unique nature to the business it will not get venture capital. If however the company is unusual in the above regard, then contact us by email with a synopsis and we will look at the options with you.

Most directors are aware that equity is “cheaper” than debt. Having a quality non executive director to help guide the board (a pre-requisite of most VCs) is also a big plus. The company’s reputation and PR are enhanced. Where growth is achieved and prospects remain good, the ability to raise further finance is enhanced.

Classically, shareholder directors see the dilution of their equity as a no-go area. Would you rather have 40% of a company worth £10m or 100% of a company worth £1m? VCs only part with money after thorough due diligence, it is hard work and costly. In the end you may not get the money. Only the best management teams with the best ideas win through. It is very time consuming – in a distress situation do you have 3-9 months to wait?

No! Use a CVA or pre-pack to restructure the costs, overheads and debts. Then a business angel or VC investor may be interested. Call Keith Steven 07974 086779 for more details.

Directors’ Loans

It may be possible for the directors or senior people to raise funds privately. This can then be loaned to the firm. Tax efficient repayment may mitigate the PAYE due on directors pay. But if the company is insolvent, repaying your loans in advance of the creditors may contravene the law.

In the event of a liquidation, the monies may have to be repaid to the company! This is a possible minefield.

Security may be taken for the directors loans – but this is a complex area and needs proper advice.

Beware you could create a potential preference (s239 Insolvency Act 1986) if you put money into an insolvent company and then pay yourself back!! Call Keith Steven for smart, expert advice 08009700539 or 07974 086779.

It is cheap, you remain in control of the financial process. It is usually a quick method to raise finance. But be warned, taking out second mortgages will require showing the lender the company’s accounts. You can repay the loan as convenient to cashflow. It can carry zero interest (you can however charge interest). Personal loans are now more freely available.

In 2019 mortgage providers lent less than 30% of the amounts in 2007. A distressed set of accounts will make borrowing harder. You can of course use credit cards and personal loans (unsecured) but the lending criteria for these product have also hardened. Remember if you lend the money to the company and then take it back out BEFORE liquidation, this is a breach of s.239 Insolvency Act 1986.

If you had lots of money it would probably already be invested in the business? Can you afford the repayments personally? If the company fails you still have to repay the loans. The bank may take some of their existing advance back after the funds are introduced. Finally, is the money you can raise really ENOUGH money to solve the company’s problems?

New Finance products


There are several web based crowd funding sites. Essentially you pitch to the investors and if they like your model they will provide equity or debt to the business. You will need a GREAT pitch, good accounting information, forecasts and a business plan.   Read more about crowdfunding here.  This particular type of funding has seen explosive growth in the last year with hundreds of companies now offering shares.

Peer to peer finance

Investors or companies can lend finance directly to businesses in exchange for interest. Those in need of finance can create a pitch which is then passed from the peer-to-peer platform (e.g. Funding Circle) to investors.

Call Keith Steven now for a guide to this innovative route to financing your business.

Recovery Loan Scheme

See this page

Short term loan providers

Advantages. Quick and easy

Disadvantages – only up to £50,000, set criteria and a personal guarantee will be needed.

Credit card finance merchant loans

This is like factoring above. Effectively you obtain a loan against the future credit card receipts in the business. So if you had sales of £100,000 on credit or debit cards last year; you can borrow £10,000-£12,000 against this. Great for a short term tax problem say, and relatively easy to obtain with no security; but a Personal Guarantee (PG) will be required.

KSA can now offer this facility to eligible clients CLICK HERE for full details

If you have a funding requirement have you thought about postponing ALL unsecured debts, collecting in debtors and work in progress and cutting costs? This huge increase in working capital is the impact a company voluntary arrangement can make.

So if the bank says no we can say yes!

We have also partnered up with Cheswick Capital. See details below;

Cheswick Capital specialises in 4M!

Raising MONEY for new start or growth companies; MANAGEMENT SUPPORT, non executive directors, expert guides in your long journey to success. MENTORING directors of fast growth companies, providing access to grey hair investors with ability to invest in your company. MERGERS ACQUISITIONS, Cheswick will buy your distressed company or business. Or advise on how to sell the assets before a formal insolvency may be required.

Looking for solutions that will help your company grow? turnaround finance?, or do not know which way to turn? Want to sell to a third party? Contact Cheswick Capital today.

9 Devonshire Square

T:020 7416 6677

If you’re concerned about your business, request our free 40-page expert guide for directors, answering everything from personal guarantees to rescue options.

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What Is A Winding Up Petition By HMRC or Other Creditor

A winding up petition is a legal notice put forward to the court by a creditor. The creditor petitions to the court if they are owed more than £750 and it has not been paid for more than 21 days. The application, in effect, asks the court to liquidate the company as they believe the company is insolvent.

What Is A Winding Up Petition By HMRC or Other Creditor

Notice of Intention To Appoint Administrators

A notice of intention to appoint administrators is when the company files a document to the court to outline that it intends to go into administration if a solution cannot be found to its immediate financial problems. It can be used as part of the pre-pack administration process as well as used to restructure a failing business to avoid its liquidation.

Notice of Intention To Appoint Administrators
Man with balloon

What Does Going Into Administration Mean?

Going into administration is when a company becomes insolvent and is put under the control of Licensed Insolvency Practitioners.  The directors and the secured lenders can appoint administrators through a court process in order to protect the company and their position as much as possible. Going Into Administration - A Simple Guide Administration is a very powerful process for gaining control when a company has serious cashflow problems, is insolvent and facing serious threats from creditors. The Court may appoint a licensed insolvency practitioner as administrator. This places a moratorium around the company and stops all legal actions.The administration must have a purpose and the Government encourages the use of company rescue mechanisms after administration. The 3 purposes (or objectives) of Administration Rescuing the company as a going concern. (Note: this purpose is to rescue the Company as opposed to rescuing the business undertaken by the Company.)Company rescue as a going concern – this is usually a  company voluntary arrangement. The company enters protective administration and is then restructured before entering into a CVA. The CVA would set out proposals for repayment of debts to secured, preferential and unsecured creditors. When the company has its CVA approved by creditors, then the administration process comes to an end after 28 days. Achieving a better result for the company's creditors This is as a whole than would be likely if the company was to be wound up (liquidation) See the differences between Administration and Liquidation.  This better result is usually obtained by selling the BUSINESS as a going concern to one or more buyers. The company and the debts are “left behind”. The better result may include securing transfer or employees under TUPE, as well as selling goodwill, intellectual property and assets. Controlling and then selling property/debtors. This is called realising assets. Then the administrator makes a distribution to one or more secured or preferential creditors, in order of creditors priority. Usually the business ceases trading and employees are made redundant.Only if the first two options are deemed unattainable, can the administrator use this third option.Under the administration option, it is possible for the company and its directors (or a creditor like the bank) to apply to the court to put the company into administration through a streamlined process.However, the law requires that any finance provider (like a bank or lender), with the appropriate security, is contacted and the aims of the administration be discussed and approved. The finance provider must have a fixed and floating charge (usually under a debenture) and the charge holder will need to give permission for the process to go ahead. Five days clear notice is required.  Be aware, though, that a secured lender can appoint administrators over a company without notice if it thinks its money is at risk.  So communication with the secured lender is essential.  

What Does Going Into Administration Mean?

What is Receivership?

in What is …? What is receivership?

Understanding Receivership: Receivership, also known as administrative receivership, is a legally sanctioned procedure where an entity, typically a lender like a bank, appoints a receiver. The primary role of this receiver is to "receive" and liquidate the company's assets, if necessary, to repay the lender. This process is particularly beneficial to creditors as it aids in the recovery of defaulted funds, potentially preventing the company from facing liquidation The introduction of a receivership simplifies the lender's task of securing owed funds in cases of borrower default.Receivership should not be confused with administration and a receiver can only be appointed by a holder of a qualifying floating charge created before September 2003. Changes to this procedure were brought in by The Enterprise Act 2002 which promoted company rescue and saving struggling businesses. Why would a company go into receivership?The company requires finance for its activities and borrows from a bank (or other secured lender). In consideration for providing the loan, the bank requires security. Normally the company will sign a debenture with a fixed and floating charge. This offers the bank security over the assets of the company. If the terms of the agreement are breached or the company does not conform to the bank's wishes, the charge holder can:Appoint investigating accountants to ascertain how secure or not the bank's debt is and determine the best route forward (not always receivership). Demand formal repayment of the loans without notice. Appoint a receiver to administer and receive the company's assets.The receiver has a duty to collect the bank's debts only,they are not generally concerned with the other unsecured creditors or shareholders' exposure.Receivership - A typical appointment Having borrowed against a business plan that has not worked, a company finds that it is suffering cashflow problems. In an effort to survive, the company reports its problems to the bank and the bank asks for more information on the problems the company faces. Struggling with the problems of firefighting, the directors find it difficult to produce the information. Often the accountancy and reporting systems are not robust and a lot of time is needed to work out where the company is going, what the depth of the problems is and the necessary reporting to the bank is delayed.As time goes by, the company's overdraft is constantly at its limit, because monies don't come in fast enough from customers. Clearly this should set alarm bells ringing at the company - it most certainly does at the bank. They call this ceiling borrowing, and take it as a sign that the directors are losing control.  When this happens the bank will review the account and will typically take some or all of the following steps: What the Bank will doThe bank will ask for a reduction in its exposure. It will ask for increased security from the directors or shareholders. Usually this takes the form of personal guarantees to support the security that the company has given through the debenture. It may ask for new capital to be introduced by the shareholders. Problem is though, occasionally, this only has the effect of reducing the bank exposure as the bank takes this cash to reduce the borrowing. It can ask for a new business plan from the directors, along with regular reporting. It may ask for the company to consider receivables finance (factoring) to remove its borrowing and move to a factor. Often the bank's own factoring company. If they are still not satisfied that the directors are in control and if the bank is concerned about its exposure it will ask for investigating accountants (or reporting accountants) to look at the business. Normally this is a large firm of accountants who send an insolvency practitioner (IP) into the business to ascertain:Is the business viable? Is the company stable? Does it have a long term future if the present difficulties can be overcome? Is the bank's exposure sufficiently covered in the event of a failure? In this report the IP calculates what the assets of the business are worth on a going-concern basis and in a forced sale scenario (or closure basis). Investigating accountants often recommend that the bank sticks with the business, but that the bank should limit any further borrowing to the fully secured variety - in other words the directors must secure it personally against property for example. If the IP thinks that the company is in serious risk of failure and that the banks may lose money in that event, he/she will usually recommend to the bank that they appoint a receiver or administrator. Usually the bank (bizarrely) requires the directors to "request the bank to appoint a receiver". This is face-saving, and designed to deflect criticism from the bank to the directors.At Company Rescue, we believe that it is wrong that the insolvency practitioner that carries out the investigation could also be the receiver - We think it is essential that his/her role as investigating accountant is limited to just that. However, fortunately most banks now agree that this is not a good approach. Once they are appointed what is the receiver's role and powers?A receiver will quickly ascertain what the prospects for business are and decide whether to sell some or all of the assets, the business as a whole, or to continue to trade whilst a better deal can be achieved. Because of the rules and case law, he may wish to get rid of the assets and staff as soon as possible. (They will have to adopt employment contracts 14 days after the appointment). They may remove directors and employees without impunity. They ultimately decides the way forward and will (often) not take advice from the directors. They must pay the preferential debts (employees claims for arrears of pay and holiday pay) first from any floating charge collections. If a deal is to be done with directors the receiver must first advertise the business and its assets for sale. They must conform to the tight rules and regulations governing receivership and report to the DBEIS. A receiver must investigate the conduct of the directors of the business and file a report with the DBEIS.Disadvantages of Receivership The company is rarely saved in its existing form. Its assets will be subject to "meltdown" ( most people know that in receivership or liquidation assets are sold at a knock down price), often jobs and economic activity are lost.The directors will typically lose their employment and any monies the company is due to them, and the company may cease to trade. In addition the director's conduct is investigated.From the creditors' perspective, it is unlikely that any unsecured creditors will receive any of their money back and often they lose a valuable customer. Clearly the cost of receivership can be very high and the bank has to underwrite the receiver's costs. Advantages of Receivership The bank can take control where directors have maybe lost control. The receiver also has power to act to save the business quickly. The bank can ensure that its exposure is (at least) not increased and hopefully recover all of its money. For directors, the advantages are that it mitigates the risk of wrongful trading and may crystallise a very difficult position allowing them to get on with their lives.Preferential creditors may see their debts repaid by the receiver.Still got questions? Click here for Receivership FAQs. If there are still unanswered questions contact us by email or call 08009700539.If your business is in trouble and the relationship with the bank is breaking down, we suggest that you look carefully at the guides in this site. Receivership may be an option. Work out the viability of the business - can you trim costs? Work out the problems, set out the position and have a meeting of directors. Decide if the business can continue but needs to be restructured or if just not viable then consider administration or if the company's lenders have a debenture pre-dating 2003 then receivership.Please call us on 020 7887 2667 (London) or 08009700539 to talk to an expert turnaround advisor if you would like to talk through your company's options.

What is Receivership?

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