Refinance, a cautionary tale (with a positive ending)


We were recently engaged to assist a £5m turnover manufacturing business through a refinance process, which was lender driven for a number of specific reasons. Our role involved weekly cash flow and critical payments monitoring, assisting the company to manage through to drawdown of a new funding facility.

The company had a number of lenders who held security principally against its freehold premises, plant and machinery and a working capital facility using invoice finance. They had suffered losses and their position was exacerbated by several key factors, including contra debt and an ongoing legal dispute worsening an already overpaid position for the invoice funder. However, the company had a strong asset base and future prospects, and we found that the key obstacles to a successful refinance process were in the financial management of the company and their provision of information being deficient, and strategic management focus being misplaced at a critical time.

Cash is the lifeblood of a business. Whilst orders in three, six, 12 months’ time are a great story for growth, more critical in these circumstances is having the funds available to meet this weeks’ and months’ wages and critical supplier payments. A lack of focus on these areas and a lack of resource within the business to otherwise deal with sales and operations, left the financial controller stretched, stressed and fire-fighting day-to-day demands particularly around working capital.

The primary factors that enabled a successful conclusion here were the availability of assets within the business to support cash (additional asset finance was drawn down to support cash flow during the refinance period including payments critical to the company maintaining its going concern such as payroll). This also included the back-stop of a freehold property with equity, giving comfort to the incumbent lenders as well as offering boot collateral to allow the incoming lender to bridge to the refinance requirement. But not every business will have a balance sheet position to support in this way.

This business was lucky. Whilst they took support and advice (not only from ourselves but also their accountant and another business advisor), allied to needing to manage the competing priorities in a difficult situation, ongoing communication was a real challenge for the lenders, particularly when the borrower was faced with difficult discussions and decisions. This highlights why intermediary help is so critical for business-owners in these situations, to both support management through a difficult and pressured time, assist with the provision of robust financial information and to better articulate the position and requirements to current and prospective funders, particularly where there are added layers of complexity such as existing or required lender priority positions to navigate.

Time for refinance?

More generally, why might a lender’s approach to a company or specific set of circumstances change?

  • A change in the lender’s risk appetite profile
  • A broader change in lender strategies such as around client or hold size, or sector exposure
  • A change in your relationship team, giving a new “set of eyes”
  • Relationship fatigue, particularly where issues such as reporting requirements, facility covenants or issues identified at audit are not resolved to the lenders satisfaction

So what if you feel your bank/ funder is no longer the right fit for your business, or your lender appears to be seeking your exit? Even in the latter circumstances, providing there is no impending doomsday scenario dictating a need for them to otherwise protect their own position, then your lender is likely to support you through a realistic period to enable a refinance.

How we can help

The length and breadth of debt funders is now extensive, giving businesses potential access to multiple alternatives. For a mature business these include property lenders, other asset based lenders such as invoice finance and asset finance, cash flow lending, mezzanine and secondary funders, alternative and co-operative finance and unsecured lending. Criteria will vary but the choice is wide, so providing that you can meet either collateral, performance or servicing demands and are able to articulate your story and position and meet financial information requirements, you should have a realistic option or options to support your business through its next cycle.

We work with a multitude of banks, asset-based lenders (ABL) and other funders and intermediaries to identify and support refinance processes. Post-pandemic, your lender relationship may not be the right one for you and it is worth considering your options. Asset-based funding can provide wider benefits to your business, such as credit control (through factoring), bad debt protection, improving processes, practices and financial information and it can be scalable, helping support your business when you grow.

To discuss this or hear more about RSM’s Restructuring for Growth guide please contact or visit our webpage, Restructuring for growth – review, reset, rebuild | RSM UK