Business Refinancing & Asset Finance: Can Funding Create a Route Forward?
Finance can solve a funding gap. It cannot make an unviable business viable.
Before raising more money, establish exactly what the money is meant to achieve. Funding may provide working capital, refinance an existing obligation, release value from appropriate business assets or bridge a temporary cash-flow gap. But new borrowing also creates new obligations.
What this means for the director
The wrong question is: "How much can we borrow?" The better questions are: "Why are we short of cash?" "What changes after the money arrives?" "Can the company service the new obligation?"
If £100,000 merely finances another six months of the same losses, the funding has not fixed the business.
What happens next
Establish: funding requirement; purpose; available security and assets; debtor book; existing charges and facilities; historic and current profitability; forecast cash generation; personal guarantees required; cost and repayment structure; what happens if the forecast misses.
Then compare appropriate funding routes with restructuring and insolvency alternatives.
Issues to establish
Cash required. Exact use of funds. Existing lenders. Security already granted. Asset values. Invoice and debtor book. Customer concentration. Monthly debt service. Director guarantees. HMRC position. Current profitability. Forecast assumptions.
Funding decision table
| Question | What it tests |
|---|---|
| What is the money for? | Defines the real problem |
| What secures it? | Identifies assets and exposure |
| What does it cost? | Tests affordability |
| Who guarantees it? | Tests personal exposure |
| What changes afterwards? | Tests whether finance solves anything |
| What if sales fall? | Tests resilience |
Questions directors usually ask
Can refinancing prevent insolvency?
Sometimes funding can form part of a viable solution. It should not be treated as proof that the underlying company is solvent or sustainable.
Should I personally guarantee new borrowing?
That is a significant personal commitment and its terms and consequences should be understood before signing. Personal guarantees can expose personal assets.
Is borrowing always preferable to formal insolvency?
No. The correct route depends on the underlying financial and commercial position.
Related authority pages
General information disclaimer
General information only. Insolvency, tax and director-liability outcomes depend on individual circumstances. Nothing on this page constitutes legal, tax or insolvency advice. Where insolvency is suspected, advice from an appropriately qualified professional should be obtained promptly.
Establish your position
Do not borrow because the company is running out of money. Borrow because the evidence shows what the money fixes and how it gets repaid.