Navigating the Restructuring Landscape With Flexible Corporate Financing
Content
The landscape of corporate health and turnaround in the UK is constantly evolving. Companies are facing dynamic challenges, from economic downturns and disruptive technologies to supply chain issues and shifting consumer preferences. Headwinds persist, including high interest rates and the risk of an economic contraction. PwC’s bi-annual Global Crisis and Resilience Survey reveals that organisations and business leaders often overestimate their resilience, even as they operate in an era of constant disruption.
While UK CEOs managed 2023’s disruptions better than anticipated, the road ahead will require greater agility and decisive action. Success will belong to those who adapt and restructure to meet the demands of a rapidly changing world. In this environment, the role of restructuring professionals and innovative independent funders has become more crucial than ever.
This article will explore the current state of business restructuring in the UK and how independent funders offers innovative corporate financing solutions for companies seeking to navigate financial distress and emerge stronger.
The Current State of Business Restructuring in the UK
Analysts point to credit restrictions and the impending refinancing risk from approaching debt maturities as significant factors contributing to ongoing business distress. The number of registered company insolvencies in England and Wales in June 2024 was 16% higher than in May 2024 and 17% higher than the same month in the previous year. The number of company insolvencies remained much higher than those seen both during the COVID-19 pandemic and between 2014 and 2019 and are likely to remain elevated due to high costs and persistent operational challenges.
Many businesses may be delaying restructuring efforts, hoping for rate cuts to improve corporate financing terms. However, significant improvement is unlikely in the short term, and many firms may not have the runway to wait much longer.
A Shifting Tide: Industry Trends Shaping Corporate Restructuring Strategies in the UK
As financially distressed businesses in the UK face the threat of insolvency, a new trend is reshaping business restructuring strategies. Collaboration between lenders, creditors, and restructuring specialists is fostering dynamic partnerships that increase the likelihood of corporate turnaround success. These partnerships merge flexible corporate financing options with essential environmental, social, and governance (ESG) guidance to create robust restructuring strategies and effective out-of-court workouts.
Let’s explore three key elements affecting the shifting tide in business restructuring strategies and corporate financing:
#1 Bankruptcy
Despite a rise in business sentiment in November 2024, there is still cause for caution as commercial insolvency filings in the UK increased by 18.4 percent YoY in April, 2024. This continued rise reflects growing economic strain on UK businesses as interest rates and costs remain high. The accelerating volume of corporate restructurings is accompanied by key challenges, including navigating regulatory hurdles, and the lack of experience among management teams in handling insolvency situations.
Collaboration with restructuring professionals and independent funders provides essential expertise and flexible corporate financing. These resources help to bolster turnaround efficiencies and facilitate a path to financial health and stability.
#2 Out-of-Court Workouts
The UK is also witnessing reforms in out-of-court workouts and corporate restructuring activities, signalling a shift towards fairness and careful planning to avoid legal challenges and ensure creditor buy-in. These workouts involve partnerships with lenders, creditors, and other stakeholders to develop effective corporate restructuring plans. These plans involve genuine compromise, not just the extinguishment of rights, with creditors receiving more than in a liquidation scenario. A growing emphasis on transparency and communication among all parties along with advancements in corporate financing flexibilities helps facilitate this collaborative approach.
#3 ESG
In addition, ESG factors are increasingly influencing restructuring strategies in the UK. Companies are prioritising both their financial viability and ESG initiatives to meet the expectations of stakeholders, customers, and government regulations. This shift is changing how businesses approach their turnaround strategies, with a growing focus on sustainability alongside financial recovery.
Flexible corporate financing options, such as those offered by specialty independent funders, offer minimal loan covenants, allowing companies to allocate funds where needed to support both their corporate restructuring efforts and ESG goals. Flexible corporate financing helps midmarket businesses balance financial recovery and growth with their commitment to sustainability.
Flexible Corporate Financing: A Key Restructuring Tool
Traditional bank loans have long been the go-to option for companies seeking working capital. However, the structured nature of these loans can limit flexibility, particularly in supporting corporate restructuring strategies or ESG goals. This is where flexible corporate financing becomes a game-changer.
Flexible corporate financing provided by experienced independent funders features fast funding, few restrictions, and expandable credit limits. This enables businesses to improve financial health and position themselves for growth. Specialized independent funders offer flexible funding solutions, such as invoice financing, that allow companies to access capital quickly, without the restrictions typically imposed by conventional bank financing.
Maximizing Access to Credit
Specialized independent funders offer a variety of financing options with minimal debt covenants and expandable credit limits, to enhance the flexibility of corporate financing. These financing solutions can be used independently or in combination to maximise access to credit. By customising terms to align with a company’s turnaround and growth strategies, independent funders provide a streamlined approach to accessing more funds, faster, and with fewer restrictions than traditional lending options.
Building relationships with experienced independent funders adds further value by providing access to their expertise in turnaround finance. These lenders understand industry-specific complexities, emerging regulations, and market trends, and use data-driven insights to guide strategic decisions. Collaborating with the best independent funders is key to accessing diverse corporate financing options and making informed decisions for long-term success.
Conclusion
The business restructuring landscape in the UK is constantly evolving, with new challenges and opportunities emerging. The increase in insolvencies, reforms in out-of-court workouts, and mounting ESG pressures all highlight the need for innovation and flexible corporate financing to manage financial distress.
Collaboration with lenders, creditors, and restructuring specialists is becoming increasingly critical for successful corporate turnarounds. In this environment, customized corporate financing has emerged as a crucial tool, offering the flexibility and agility needed to support effective out-of-court workouts and avoid bankruptcy.
Building strong relationships with experienced independent funders can further enhance a company’s ability to adapt and thrive. These lenders bring added value through expertise and tailored solutions, such as invoice financing, that can help companies navigate financial distress and emerge stronger. Companies that embrace the benefits of flexible corporate financing will be better positioned to tackle cash flow challenges, meet evolving stakeholder expectations, and achieve sustainable growth.
Key Takeaways:
- UK business insolvency filings increased by 17 percent year-on-year and are expected to remain elevated due to high interest rates and regulatory pressures.
- Collaboration with restructuring professionals and specialty independent funders is essential to navigating the corporate restructuring landscape in the UK.
- Establishing strong relationships with experienced specialized independent funders is crucial for acquiring flexible corporate financing.
- Flexible corporate financing can provide the agility needed to support both financial recovery and ESG goals.
eCapital UK
eCapital Commercial Finance (eCapital) is a leading invoice financier providing funding facilities up to £4m to support the growth of SMEs through the provision of flexible working capital facilities. With five fully functional UK regional offices, its local teams are uniquely placed to respond promptly and purposefully to the cashflow needs of its clients. The business has grown significantly since its launch in 2001, providing over £12 billion of funding to businesses. It is majority owned by eCapital, a US based financial services business with interests in the USA and Canada.
