Financing for Distressed Companies

How to find financing when your company's in trouble

By Mary Sit, corporate writing/articles/Web content/scripts, Mary Sit Communications

Small businesses can quickly spiral into trouble. The management team can depart to start a competing business. The business can grow so rapidly that it outpaces management's skills. Or a family feud can rip it apart. When you need financing for a distressed business, keep in mind three important points:

An experienced, outside turnaround specialist can see solutions you don't and can find the root cause of your business woes while helping you obtain an infusion of cash.
Operate as if cash is king by spending less, knowing where every dollar goes, and refraining from spending until you make money.
Beef up your management team. You need qualified key staffers to rebuild your company. Founders need to be able to recruit leaders for the next stage of growth. Shed deadwood – unproductive staff or assets.

Seek help from an investment banker

Investment bankers who specialize in turnarounds can help you find financing from investors willing to take bigger risks than banks - and sometimes an equity position in your company.
Try: Mirus Capital Advisors, investment bankers since 1987,says financing should be dictated by operating plans, not the other way around. It works with entrepreneurs and family-owned businesses, finding solutions for distressed companies. Kramer Levin represents lenders to companies in and out of bankruptcy.

Bring in turnaround specialists to help line up financing

Turnaround management specialists can help a struggling business locate needed financing.
Try: Find specialists through the Turnaround Management Association. Turnaround Consultants International also has helpful advice and information.

Hire someone with the right credentials

Some types of turnaround professionals can earn certifications and must adhere to a standard of excellence.
Try: Anderson Bauman Tourtellot Vos is a turnaround management firm, specializing in operational and financial restructuring for troubled companies.

Try free advice

Small business development centers offer free advice that can help salvage a distressed business.
Try: Locate a Small Business Development Center near to you.

Find quick cash based on future sales

Get a business capital advancebased on future receipts - without showing business and personal tax returns, collateral, personal and business guarantees or a business plan.You'll need to produce the past four months' Mastercard and Visa receipts.
Try: Merchants First accepts most applicants regardless of credit rating and wires funds – from $3,000 to $250,000 - within seven days of completed contracts. Instant Capital Solutions offers FlowFunding and partners with Wells Fargo and Brown brothers Harriman, the nation's oldest privately owned bank. Business Cash Advance offers cash ifyou have at least $2,100 in Mastercard or Visa transactions per month; have no prior, unresolved bankruptcy; and have been in business at least 12 months.

A good investment banker will not only know where to look for financing, he will know what the financing source needs and then get it.
Recognize the red flags of a faltering company: consistent operating losses, cash flow shortages, departure of key employees, decline of more than 5 percent market share for two consecutive quarters.
Timing counts in a distressed market. Be decisive and take action instead of waiting for things to improve.