Why Is Turnaround Finance So Important?

In a turnaround, resources are extremely scarce. Therefore, there is commonly a requirement for additional finance.

There may also be requirements to raise cash to repay certain creditors who are demanding immediate repayment. For example, the business may be under performing to such a degree that it is potentially insolvent and the company’s bankers are demanding repayment. In this scenario, without new and replacement finance the turnaround will fail.

Therefore, “Turnaround Finance” is normally an essential component of most turnarounds.

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Outline of This Chapter

The approach taken is to

  1. Explain the theory of turnaround finance, and
  2. Then set out the practical steps that need to be taken to raise turnaround finance.

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Who Should Be Interested in Turnaround Finance

The following chart illustrates the parties who are involved in Turnaround Finance.


Turnaround Finance techniques and sources can be used to:
Improve existing securityMinimise risks, or

Facilitate an exit route

New Providers of Turnaround Finance Providing finance in a turnaround is inherently risky. Appropriate structuring can both minimise risks and maximise returns.
Other Stakeholders To gain continuing support from key stakeholders – such as suppliers whose confidence may have been shaken – it may be important to be able to demonstrate that the business is well funded. Without this suppliers may require cash in advance of delivery – which may eliminate the company’s ability to trade.

Raising Turnaround Finance is Hard!

It is important to understand that raising adequate Turnaround Finance is not easy. Therefore, it is important to understand the realities of the challenge, and adopt a disciplined approach.

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Addressing the fundamental lack of available risk capital that can be applied quickly in a financially distressed business

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