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Est. 1989

My company is in cash flow crisis and needs investment

Licensed UK Insolvency Practitioners FREE Meeting for Company Directors

We can help with serious company debts, HMRC and creditor pressure, VAT/PAYE/Tax arrears, cash flow problems and raising finance.

Reviewed: 6th November 2019

When businesses suffer cash flow problems it can be difficult to secure the borrowing needed to recover financial stability. Lenders view them as high risk, even though a company can be cash poor but still profitable.

An alternative option that might deal effectively with the company’s cash flow crisis, however, is investment by an individual or group. So what types of investment might be available to your business at this difficult point, and what should you consider when trying to attract investors?

Private equity (PE)

Private equity firms use funds from institutional investors such as insurance companies and pension providers, as well as high net worth individuals, and typically invest in companies they can improve.

A company may be struggling with outdated systems, for example, and private equity funding would address the inefficiency, improving operational practices with a view to scaling up performance for the long-term.

Angel investment

Angel investing is a type of equity finance commonly sought by new or early stage businesses. Investors typically operate in an individual capacity, or sometimes in a syndicate alongside other ‘business angels.’ They usually offer broad commercial experience and expertise in addition to providing the investment.

There is some regulation in angel investing, but you need to make sure investors have certified themselves as Sophisticated or High Net Worth Investors in line with Article 48 of the Financial Services and Markets Act, 2000.

Angel investors don’t generally require fast returns, being more interested in the longer-term future of the business, so they may be a good fit in circumstances where cash flow is temporarily compromised.

Venture capital (VC)

Venture capital funding is generally provided to companies with potential by limited partnerships that collectively invest in a business in return for equity stake. Investors may also demand an active role on the board of the company, or other involvement in the business, such as with recruitment.

VC investors can provide valuable market or industry knowledge in addition to their funding, and services that support the companies they’ve invested in - marketing or technology, for instance.

What to consider when seeking investment

Present your business well

Even though cash flow is a significant issue for your company, to attract investment it’s important to clearly articulate the business’ potential and reasons why cash flow has been compromised.

A strong team

Investors will be looking for a strong management team with the skill and drive to move the business forward despite its current problems. Presenting your business in a favourable but credible light, and with a clear understanding of the specific type of investment you’re seeking, could attract the right funding and steer it clear of insolvency.

Well-researched projections and investment options

As cash flow is a serious problem, your forecasts and figures need to be thoroughly researched and convincing to potential investors. It’s also crucial to research all your investment options, seeking professional advice before moving forward as you’re likely to need specialist help to develop a strategy.

Real Business Rescue specialises in business turnaround and can offer you tailored advice on securing investment when cash flow is poor. Our partner-led team will make sure you understand the investment options most suitable for your company, and support you in attracting the right type of investor.

Please contact one of the team to find out more. Our network of offices extends throughout the UK, and we can offer you a free same-day consultation to quickly address your concerns.

Jonathan Munnery

Partner

0800 644 6080
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