Turnaround Financing Alternatives
Finding financing for your turnaround is a difficult job for any CEO or CFO leading a struggling business. To help you decide on the proper turnaround financing for your business, we have created this short web page with 5 choices. Each of these turnaround financing choices has it pros and cons. You should study each carefully before planning your turnaround financing initiatives.
1. Look for conventional financing
We start with this alternative because CEOs and CFOs chase this alternative
in most cases … and they usually fail. This is not your best choice
when your firm is in trouble. If you look for conventional financing,
bank loans, VC funding, asset-based deals, you are just wasting your time.
Why? Because no one will invest in a company that is in freefall. This is a simple and harsh truth. We have seen so many financially distressed firms chase conventional financing, and then fail because the leadership should have followed one of the other choices in our list. Ignore this advice at your and your company’s peril.
2. Look for financing from you current operations
By far the best place to get financing is from internal operations. You have
complete control of this and don’t have to wait for a term sheet. Clearly,
the best sources from your operations are dramatic cost cuts and sale of receivables.
These two items usually mean quick cash for your firm.
3. Sell assets
If you have assets that do not contribute to your profitability, then you
should sell them. This could include old equipment, real estate and intangibles.
4. Stretch suppliers
Stretching suppliers is an art. If you stretch them too much, they will stop
shipping to you and threaten lawsuits and bankruptcy. But, if you don’t
stretch them enough, then you have left money on the table. In our experience,
you should be able to stretch most vendors at least 60 days before they shut
you off. Putting in place a stretching program can often give you a month
of extra cash.
5. Dip into your own pocket
If you cannot find money from any other source, then you must self-finance.
You may find this difficult choice. If you do not believe enough in the business
and your turnaround plan to make a personal investment, then you probably
wouldn’t have been able to turnaround the business anyway.
The best source that explains turnaround financing alternatives is The Insider Secrets to Saving Your Business the Step-by-Step Turnaround Guide. You should read this guide carefully if you are serious about finding extra funding and rebuilding your distressed business.
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