Turnaround Finance

Critical Turnaround Finance Principles

Act Quickly

Time is critical when your business faces financial pressure

Demonstrate Viability

Show clear plans for recovery and return to profitability

Bridge the Gap

Access funding when traditional lenders won't help

Professional Support

Work with specialists who understand distressed businesses

Critical insight: Turnaround finance isn't about throwing good money after bad. It's emergency funding for viable businesses facing temporary cash flow crises that can be resolved with the right capital injection and recovery plan. If your business needs more comprehensive restructuring, explore our Company Voluntary Arrangement (CVA) services.

Assess Your Finance Options

What is Turnaround Finance?

Turnaround finance is emergency funding for businesses in financial distress that cannot access traditional lending. Unlike growth capital, it's designed to buy time to implement change initiatives, stabilize operations and facilitate recovery.

Why Turnaround Finance is Essential

The Cash Crisis Reality

In a turnaround, resources are extremely scarce. There is commonly a requirement for additional finance to repay demanding creditors, fund operations while the business recovers, and provide working capital during the critical recovery phase.

• Creditors demanding immediate repayment
• Banks potentially calling in facilities
• Working capital needs during recovery
• Professional fees and restructuring costs

Without Cash, Businesses Fail

Without adequate turnaround finance, even viable businesses with sound recovery plans will fail. The business may be fundamentally sound but facing temporary cash flow pressures that require immediate financial intervention.

Critical Point: Turnaround finance is normally an essential component of most turnarounds. No matter how solid other recovery elements are, lack of adequate funding will cause failure.

The Fundamental Truth: Raising adequate turnaround finance is not easy, but it's absolutely essential. Understanding the challenge and adopting a disciplined approach is critical for success. In some cases, formal insolvency protection through Administration may be necessary to buy time while securing funding.

Key Characteristics

Short-term Solution

Designed as temporary financing to bridge cash flow gaps

Specialist Lenders

Provided by lenders who understand distressed businesses

Flexible Terms

Can be used for creditor payments, working capital, or restructuring

When Turnaround Finance is Needed

Creditor Pressure

Facing statutory demands or winding up petitions

Cash Flow Crisis

Unable to meet operational expenses or key payments

Banking Facilities Withdrawn

Traditional lenders have reduced or removed credit facilities

Turnaround Finance vs Traditional Lending

Traditional Bank Lending

• Requires strong credit history
• Focuses on growth and expansion
• Lower interest rates
• Lengthy approval processes
• Risk-averse approach

• Available to distressed businesses
• Focuses on stabilization and recovery
• Higher cost but accessible when needed
• Rapid deployment possible
• Specialist understanding of crisis situations

Common Triggers for Turnaround Finance

Understanding the financial pressures that drive businesses to seek emergency funding is crucial. These issues often compound quickly and require immediate professional intervention.

Section 455 Tax on Director Loans

Section 455 Corporation Tax applies when a company makes a loan to a participator (typically a director or shareholder) that remains outstanding nine months and one day after the company's accounting period ends. This creates an immediate tax liability of 33.75% of the outstanding loan amount.

How Section 455 Works

• Tax charge: 33.75% of the outstanding loan balance
• Due: Nine months and one day after year-end
• Applies to loans to directors, shareholders, and participators
• Additional charge on top of any other taxes owed
• Creates immediate cash crisis for already struggling companies

Avoiding and Reclaiming the Charge

• Avoid the charge: Repay the loan before the nine-month-and-one-day deadline
• Reclaim tax: Once loan is repaid, company can reclaim the tax paid
• Reclaim is not automatic - must be claimed from HMRC
• Cannot reclaim until nine months after the repayment date
• Anti-avoidance rules prevent "bed and breakfasting" schemes

Example Scenario:

Director has an overdrawn loan account of £100,000. If not repaid within nine months and one day after year-end, the company must pay £33,750 in Section 455 tax to HMRC. For a distressed business already struggling with cash flow, this additional burden can be catastrophic.

Turnaround finance solution: Emergency funding can be used to repay the director loan before the deadline, avoiding the 33.75% tax charge and preserving precious working capital for business recovery. If the tax debt has already accumulated, we can help negotiate HMRC Time to Pay arrangements as part of your recovery strategy.

HMRC VAT Arrears

VAT arrears are one of the most serious creditor pressures facing distressed businesses. HMRC has preferential creditor status and extensive enforcement powers.

Enforcement timeline: HMRC can issue statutory demands within 21 days of missed payment

Winding up petitions: Can be presented if debt exceeds £750 and remains unpaid for 21 days. Learn more about defending winding up petitions.

Preferential status: HMRC ranks ahead of floating charge holders in insolvency

Penalties and interest: Accumulate rapidly on unpaid VAT, compounding the problem

PAYE & NIC Arrears

Pay As You Earn (PAYE) and National Insurance Contributions (NIC) arrears are treated with zero tolerance by HMRC. These are employee taxes held in trust, making non-payment particularly serious.

Trust status: PAYE/NIC are employee funds held in trust - serious breach of fiduciary duty

Director liability: Personal liability possible if company insolvent with PAYE arrears

Immediate action: HMRC pursues PAYE debts more aggressively than most other tax arrears

Time to pay: Arrangements possible but require solid case and professional negotiation

Other Critical Arrears Requiring Emergency Finance

Corporation Tax Arrears

Unpaid Corporation Tax attracts interest and penalties. HMRC can pursue collection through statutory demands and ultimately winding up petitions if arrears remain unresolved.

Business Rates Arrears

Local authorities can use bailiffs to recover business rates and can ultimately petition for winding up. These debts accumulate quickly and carry enforcement costs.

Landlord Rent Arrears

Landlords can forfeit leases and use Commercial Rent Arrears Recovery (CRAR) to seize goods. Loss of premises can be fatal to business operations.

Utility Arrears

Utility companies can disconnect services for non-payment, bringing operations to an immediate halt. Reconnection often requires substantial deposits and clearance of arrears.

Critical Supplier Arrears

Key suppliers withdrawing credit or refusing to supply can cripple operations. Emergency funding may be needed to clear arrears and restore essential supply relationships.

Bank Facility Recalls

Banks calling in overdrafts or loans on demand creates immediate liquidity crisis. Alternative funding needed to replace withdrawn facilities and maintain operations.

Facing HMRC Pressure or Critical Arrears?

Section 455 tax charges, HMRC arrears, and other creditor pressures compound rapidly in distressed situations. K2 can help you assess your options, negotiate with creditors, and secure emergency funding to stabilize your position.

Get Immediate Assessment 020 7720 8000

Warning: The Dangers of Multiple Secondary Lenders

When traditional banks withdraw support, many businesses turn to secondary lenders. While these can provide essential bridging finance, taking multiple loans from different providers creates compounding risks that can quickly spiral out of control.

The Personal Guarantee Trap

Most secondary lenders require personal guarantees to secure their loans. When you take multiple loans from different providers, you're potentially putting your personal assets—including your home—at risk multiple times over.

The Compounding Risk

• Each loan typically requires separate personal guarantees
• Your personal liability multiplies with each additional lender
• Multiple lenders can pursue your home and personal assets simultaneously
• Interest costs compound rapidly—often 1-3% per month per lender
• Coordination becomes impossible when multiple lenders act independently

Real-World Consequences

• Directors losing family homes to multiple lender claims
• Personal bankruptcy from accumulated guarantees
• Stress and family breakdown from financial pressure
• Loss of all personal assets built over a lifetime
• Criminal prosecution risk if wrongful trading continues

Example Scenario: The Downward Spiral

A director facing cash flow problems takes a £50k loan from Funding Circle (1.5% monthly interest, personal guarantee). Three months later, still struggling, they take £40k from iwoca (2% monthly, another personal guarantee). Two months after that, facing HMRC demands, they borrow £30k from Liberis (2.5% monthly, revenue-based with personal guarantee).

Result: £120k total debt, monthly interest payments of £2,900+, three separate personal guarantees covering £120k total exposure, and three different lenders who can each independently pursue the director's home. The business collapses under the debt burden, and the director loses everything—home, savings, pension.

Why Businesses End Up with Multiple Secondary Lenders

The "Snowball Effect"

First loan doesn't solve the underlying problem. More loans are taken to service the first, creating a debt spiral that becomes impossible to escape.

Crisis Management

When facing immediate threats (statutory demands, winding up petitions), directors grab any available funding without considering long-term consequences.

Lack of Professional Advice

Without expert guidance, directors don't understand the compounding risks or realize there may be better structured solutions available.

The K2 Alternative Approach

Coordinated Finance Strategy

Rather than accumulating multiple uncoordinated loans, K2 helps structure a comprehensive finance package that addresses all your needs through coordinated solutions.

• Single coordinated approach with appropriate lenders
• Proper security structuring to protect personal assets where possible
• Subordination agreements between lenders
• Clear priority structures avoiding conflicts
• Professional negotiation reducing overall costs

Asset Protection Strategies

We work to minimize personal exposure while securing necessary funding, protecting you and your family from catastrophic loss.

• Limited personal guarantees where possible
• Asset-based structures reducing personal risk
• Proper legal documentation protecting directors
• Insurance-backed solutions in some cases
• Clear exit strategies from day one

Critical Action Point: If you already have multiple secondary lenders, or if you're considering taking additional loans, speak to K2 immediately. We can help consolidate existing debts, restructure your finance arrangements, and protect your personal assets before it's too late.

Get Urgent Risk Assessment Emergency Call: 020 7720 8000

Understanding UK Secondary Lenders

Secondary lenders fill the gap when traditional banks won't lend. While they provide essential access to capital, understanding their terms, costs, and risks is crucial before committing to any facility.

Secondary Lender Comparison Table

Lender	Loan Range	Type	Interest Rate	Speed
Funding Circle	Up to £750k	Unsecured loans	From 1.99% APR	1 hour decision
iwoca	Flexible amounts	Fast-access loans	Transparent, no hidden fees	Fast funding
MarketFinance	Invoice dependent	Invoice discounting	Up to 90% of invoice	24 hours
Fleximize	£10k-£500k	Secured/unsecured	0.9%-3.9% monthly	24 hours
Capital on Tap	Up to £250k	Credit facility	Interest on drawn funds only	Fast access
Liberis	Revenue-based	Revenue-based finance	Flexible with sales	Quick approval
YouLend	Up to £1m	Revenue-based finance	Aligned with cash flow	Minutes
Bibby Financial	Up to 85% invoices	Invoice finance	Competitive rates	24 hours
Nucleus	£3k-£500k+	Multiple products	Varies by product	24 hours
ThinCats	£250k-£15m	Secured loans	Competitive	Varies
LendingCrowd	£5k-£50k	P2P loans	From 5.95%	Variable

Important: This table provides general information only. Actual rates, terms, and availability vary by individual circumstance. Always obtain specific quotes and read all terms carefully before committing to any facility.

Detailed Secondary Lender Profiles

Funding Circle

UK's leading peer-to-peer lending platform for small business loans. Established alternative lender with strong track record and competitive rates for qualifying businesses.

Loan Range: Up to £750,000

Products: Unsecured business loans, Growth Guarantee Scheme loans, Business credit cards

APR: Representative from 1.99% for 1-month terms

Speed: Decision in as little as 1 hour

Features: 2% cashback on business cards (first 6 months), no foreign exchange fees

Risk Factor: Personal guarantees typically required. Fast decisions can lead to taking on debt without full consideration of long-term implications.

iwoca

One of Europe's leading digital lenders since 2012. Known for simple, fair, and transparent approach to business lending with over 90,000 businesses helped across Europe.

Loan Range: Flexible amounts designed around business needs

Products: Fast-access business loans, flexible business loans

Features: No early repayment penalties, clear upfront fees, no hidden costs

Speed: Quick funding with larger amounts than many credit card alternatives

Risk Factor: Flexibility can mask high costs. Multiple drawdowns can accumulate significant debt quickly without proper cash flow planning.

MarketFinance

Innovative online lending platform (formerly MarketInvoice) that has provided over £1 billion to UK companies since 2011. Backed by Barclays Invoice Finance and Santander InnoVentures.

Products: Selective Invoice Discounting (Spot Factoring), Unsecured business loans

Advance: Up to 90% of invoice value within 24 hours

Funding: Two daily funding sessions (12pm and 5pm)

Options: Pay-as-you-go or fixed monthly fee

Eligibility: Limited companies/LLPs with minimum £100k annual turnover

Risk Factor: Invoice finance can create dependency. Confidential arrangements may require personal guarantees. Costs can escalate with multiple invoices funded.

Fleximize

Award-winning digital business lender based in Ipswich, established 2014. Winner of Best Business Finance Provider at British Bank Awards (twice). Over £100 million lent to 3,000+ UK businesses.

Unsecured: £10,000-£250,000 (1-42 months)

Secured: £10,000-£500,000 (up to 48 months)

Interest: 0.9%-3.9% per month representative

Features: Top-ups after 3 payments, repayment holidays, no early repayment penalties

Eligibility: 6+ months trading, £5,000 monthly turnover minimum

Risk Factor: Monthly interest rates of 0.9-3.9% translate to 11-47% APR. Personal guarantees required. Top-up facility can encourage further borrowing when struggling.

Capital on Tap

Unique credit card-style approach to business lending. Combines flexibility of credit card with higher limits typically associated with business loans.

Facility Range: Up to £250,000

Structure: Credit card-style flexible facility

Interest: Charged only on funds drawn and only for days owed

Fees: No annual or monthly fees

Features: Transfer to bank account or use via card, multiple cards available, flexible repayment

Risk Factor: Credit card convenience can lead to overuse. Interest on drawn funds can accumulate rapidly. Easy access may encourage poor financial discipline.

Liberis

Global embedded finance platform founded 2007, operating from London. Specializes in revenue-based financing with operations serving eCommerce, SaaS providers, and payment platforms. Trustpilot: 4.8/5 (1,292 reviews).

Type: Revenue-based financing

Repayment: Flexible with daily/weekly card sales - pay more when earning more

Features: No fixed monthly payments, quick approval, ideal for fluctuating income

Integration: Works with eBay, Worldpay, Vagaro, Sezzle platforms

Risk Factor: Revenue-based repayments can take significant percentage of daily sales. Total repayment amount often substantially exceeds principal. Can strain cash flow during crucial periods.

YouLend

Embedded financing provider founded 2015, based in London. Enables businesses to offer financing through platform integration. Serves e-commerce, payment providers, brokers, and banks. Trustpilot: 4.8/5.

Loan Range: Up to £1 million

Type: Revenue-based finance

Approval: Minutes for decision

Repayment: Aligned with daily or weekly cash flow based on actual revenue

Best For: eCommerce-focused businesses with recurring card sales

Risk Factor: Large facility amounts (up to £1m) can create massive repayment obligations. Daily deductions from revenue can cripple working capital during difficult trading periods.

Bibby Financial Services

UK's largest independent invoice finance company, founded 1982. Part of Liverpool-based Bibby Line Group (est. 1807). Global provider in 9 countries supporting 8,500+ UK businesses and 10,000+ globally. Trustpilot: 4.6/5 (884 reviews).

Products: Invoice finance, asset finance, trade finance, FX services

Advance: Up to 85% of invoice values, typically within 24 hours

Specialist Solutions: Construction finance, recruitment finance, corporate funding (£5m+ turnover)

Coverage: 300+ industry sectors, bad debt protection available

Risk Factor: Invoice finance creates ongoing fees and can be expensive long-term. Customers may be notified of arrangement. Personal guarantees typically required.

Nucleus Commercial Finance

Fast-growing fintech founded 2011 providing technology-driven funding. Over £2.9 billion lent to UK SMEs. Winner of Best Use of IT in Commercial Finance Award (2024 FSTech Awards).

Range: £3,000-£500,000 (unsecured), up to £50m for specific products

Products: Unsecured loans, revenue-based loans, asset finance, invoice finance, ABL, property finance

Features: Near-instant offers, 24-hour funding, remote document signing, fixed weekly direct debits

Revenue-Based: Borrow up to 200% of monthly revenue

Risk Factor: Wide product range can lead to multiple facilities with same lender. Fixed weekly debits regardless of trading performance. Easy approval may encourage over-borrowing.

ThinCats

Business lending platform for larger loans to established businesses. Focus on medium-sized enterprises needing substantial funding with flexible terms.

Loan Range: £250,000 to £15 million

Terms: 6 months to 5 years

Products: Working capital, refinance, growth finance, acquisition finance, asset finance

Requirements: Security required to back the loan, each case considered individually

Risk Factor: Large loan amounts create significant obligations. Security requirements can put substantial business assets at risk. Suited for growth, not distressed situations.

LendingCrowd

Peer-to-peer lending platform connecting investors directly with business borrowers. Competitive bidding system allows borrowers to control terms and select best deals.

Loan Range: £5,000 to £50,000

Terms: 6 months to 5 years

Rates: Starting at 5.95%

Features: Borrowers control loan terms, competitive bidding, transparent platform

Risk Factor: P2P lending can be complex. Multiple investors means multiple stakeholders if issues arise. Not suitable for urgent funding needs.

Merchant Money

Specialist provider of flexible funding to UK SME market, established 2013. Focus on helping small businesses grow with tailored facilities without traditional bank bureaucracy.

Products: Flexible funding for stock purchases, refurbishment, cash flow, working capital

Approach: Tailored facilities for specific business requirements

Features: Quick and accessible funding, designed for small business needs

Risk Factor: Flexible terms may mask high costs. Limited public information on rates and terms. Always obtain full written quotation before proceeding.

Cashplus (Zempler Bank)

Digital challenger bank founded 2005. First UK general-purpose prepaid card provider. Banking and lending for entrepreneurs and independent businesses. App ratings: 4.4/5 (App Store), 4.0/5 (Google Play).

Business Cash Advance: Up to £300,000 (via Liberis partnership)

Repayment: Through card sale payments, flexible based on earnings

Other Products: iDraft (overdraft up to £2k), Debit Protect, business current accounts

Features: Free overseas transactions available

Risk Factor: Cash advance via Liberis carries revenue-based repayment risks. Multiple products with same provider can create dependency. Overdraft fees can accumulate.

Critical Summary: The Real Cost of Secondary Lending

Hidden Dangers

• Monthly interest rates sound low but translate to high APRs (12-50%+)
• Personal guarantees put your home and assets at risk
• Multiple lenders mean multiple claims against your assets
• Easy approval can lead to unaffordable debt burden
• Revenue-based repayments take cash when you need it most
• Costs compound rapidly when multiple facilities are used

When to Seek Expert Help

• Before taking your first secondary lender loan
• If you already have one or more secondary lender facilities
• When considering additional borrowing to service existing debt
• If struggling to meet repayments on any facility
• When creditors are threatening legal action
• Before giving any personal guarantees

K2's Perspective: Secondary lenders serve an important purpose, but they're not suitable for businesses in serious financial distress. The costs are too high, the terms too inflexible, and the personal risks too great. If you're already struggling with cash flow, adding expensive debt rarely solves the underlying problem—it usually makes it worse.

Before taking any secondary lender facility, especially if you already have debt, speak to K2 about structured alternatives that protect your assets and address root causes.

Proving Business Viability

Turnaround finance providers need clear evidence of your path from losses to profitability. K2's Balance Sheet Bridge and Profit & Loss Bridge approach to forecasting show exactly how you'll achieve commercial viability.

K2's Bridge Forecast Components

Cash Flow

Document cash flow improvement initiatives

Cost Reductions

Quantify specific cost-saving initiatives

Revenue Improvements

Detail realistic revenue enhancement plans

Focus on Drivers of Productivity

Minimise overheads and drive gross margins

Critical Requirement: Your bridge statement must show credible, measurable steps from current losses to sustainable profitability. Vague promises won't secure funding.

Why Viability is Essential

• Business must generate immediate operating cash flows
• Positive EBITDA must be achievable within realistic timeframe
• Without viability, turnaround will fail regardless of other factors
• Lenders need proof, not just promises of recovery

Bridge Statement Requirements

• Quantified cost reduction initiatives with timelines
• Realistic revenue improvement strategies
• Monthly cash flow projections showing recovery path
• Clear milestones and measurable targets

Types of Turnaround Finance

Various financing structures are available depending on your business situation, asset base, and recovery requirements.

Asset-Based Lending

Secured against: Debtors, stock, plant & machinery

Typical advance: 70-85% of eligible assets

Best for: Businesses with substantial asset bases

Speed: 2-4 weeks to facility

Bridging Finance

Secured against: Property and land

Typical advance: Up to 75% of property value

Best for: Property-rich businesses

Speed: 1-2 weeks to completion

Mezzanine Finance

Structure: Debt/equity hybrid

Typical amount: £500k - £5m+

Best for: Growth-stage recovery plans

Speed: 4-8 weeks due diligence

Emergency Funding

Purpose: Immediate creditor payments

Typical amount: £50k - £500k

Best for: Urgent statutory demand issues

Speed: 48-72 hours possible

Invoice Finance

Secured against: Outstanding invoices

Typical advance: 80-90% of invoice value

Best for: B2B businesses with good debtors

Speed: 1-2 weeks to setup

Trade Finance

Purpose: Import/export funding

Typical amount: Order-dependent

Best for: Trading businesses with orders

Speed: 1-3 weeks to facility

Need Help Choosing the Right Option?

Every business situation is unique. Our specialists can assess your specific needs and connect you with appropriate turnaround finance providers.

Get Finance Assessment

Understanding Turnaround Finance Risks

Turnaround finance carries unique risks that both businesses and funders must carefully consider and mitigate through proper structuring and legal protection.

Legal Risk Factors

Voidable Transactions

Security created while insolvent may be set aside by courts

Director/Shadow Director Risk

Funders may face personal liability if deemed directors

Disqualification Risk

Acting improperly can lead to director disqualification

Creditor Litigation

Risk of legal action from directors, company, or creditors

Operational Risk Factors

Time Pressure Risk

Limited due diligence time increases investment risk

Creditor Action Risk

Key creditors may take action that jeopardizes turnaround

Performance Risk

Business has already proven financial difficulties

Information Quality Risk

Financial reporting may be poor or unreliable

Risk Mitigation Strategies

Legal Protection

• Specialist legal advice on all structures
• Proper documentation of all transactions
• Insolvency law compliance checks
• Director protection measures

Enhanced Security

• Maximum security coverage
• Priority arrangements with existing lenders
• Personal guarantees where appropriate
• Asset-backed structures

Process Control

• Pre-packaged deal structures
• Accelerated due diligence processes
• Creditor management strategies
• Professional turnaround teams

Critical Note: Higher risks demand higher returns. Turnaround finance typically costs 1-3% per month plus arrangement fees, reflecting the elevated risk profile and urgent nature of funding.

Eligibility for Turnaround Finance

Turnaround finance providers assess both the viability of your business recovery and your ability to service the additional funding.

Essential Requirements

Viable Core Business

Underlying business model must be fundamentally sound

Clear Recovery Plan

Detailed strategy showing path back to profitability

Adequate Security

Assets or guarantees to secure the additional funding

Potential Disqualifiers

Fundamental Business Failure

Core business model is no longer viable

Advanced Insolvency Process

Already in formal insolvency proceedings. However, pre-pack administration combined with turnaround finance may still save the business.

Management Issues

Lack of competent management to execute recovery

Lender Assessment Process

1

Financial Review

Analysis of accounts, cash flow, and trading position

2

Recovery Plan

Evaluation of proposed turnaround strategy

3

Security Assessment

Valuation of available assets and guarantees

4

Risk Assessment

Overall risk/reward analysis and structuring

Remember: Turnaround finance providers are looking for businesses they can help succeed, not lost causes. A well-prepared application significantly improves your chances.

Get Application Support

Why Turnarounds Need More Cash

Turnaround situations typically require significantly more funding than normal operations due to unique cash flow pressures and working capital demands.

Loss of Trade Credit

Suppliers often demand cash on delivery (COD) terms when businesses are distressed, eliminating the working capital benefit of trade credit.

Impact: If you previously had 30-day payment terms on £100k monthly purchases, moving to COD requires an immediate £100k cash injection.

Debtor Collection Gap

Even after restructuring improves the balance sheet, there's a timing gap while existing debtors convert to cash to fund new operations.

Example: £200k in debtors may take 60 days to collect, but you need working capital for new sales immediately.

Professional Fees

Turnarounds involve significant additional costs for legal, accounting, and specialist advisory services that must be funded.

Typical costs: £50k-£200k+ in professional fees depending on complexity and size of business.

Credit Withdrawals

Banks and other credit providers often withdraw facilities, requiring immediate repayment or cash alternatives for operations.

Risk: Overdraft clawback and supplier deposit demands can absorb significant cash immediately.

Creditor Demands

Critical creditors like HMRC or secured lenders may demand immediate repayment to prevent statutory demands or enforcement action.

Urgency: Statutory demands require settlement within 18 days to avoid winding up petition.

Working Capital Recovery

After restructuring, the business needs additional working capital to restart normal trading cycles and rebuild operations.

Reality: Post-restructuring businesses often need 150-200% of normal working capital to rebuild.

The Cash Flow Reality

Immediate Cash Drains

• COD supplier payments replacing credit terms
• Professional fees for legal and advisory support
• Urgent creditor settlements to avoid legal action
• Bank facility repayments and clawbacks
• Security deposits for utilities and suppliers

Recovery Capital Needs

• Additional working capital for restart trading
• Bridge funding while debtors convert to cash
• Investment in systems and controls
• Marketing and business development costs
• Contingency reserves for unforeseen issues

Key Insight: Turnarounds commonly require 50-100% more cash than originally estimated. Ensure your funding package includes adequate contingency reserves for these additional demands.

How K2 Secures Turnaround Finance

With extensive networks and deep understanding of specialist lenders, K2 connects distressed businesses with appropriate funding sources and structures deals for success.

Our Turnaround Finance Process

Rapid Assessment

Quick evaluation of your situation and funding requirements

Lender Matching

Connect with specialist lenders suited to your specific needs

Application Management

Professional preparation and presentation of your case

Deal Negotiation

Secure best possible terms and structure for your situation

Why Choose K2 for Turnaround Finance

200+

Distressed businesses funded

£25M+

Emergency funding secured

Specialist Network:

Direct relationships with UK's leading turnaround finance providers, from emergency funders to asset-based lenders.

Emergency Finance Success

The Crisis: Manufacturing company facing winding up petition with £180k owed to HMRC, banks withdrawing facilities, and 45 staff at risk.

The Solution: K2 secured emergency asset-based funding within 72 hours, paid statutory demands, and structured ongoing working capital facility.

The Result: Business stabilized, jobs saved, and company now trading profitably with restored banking relationships.

Get Emergency Finance Call: 020 7720 8000

K2's Emergency Response:

• Immediate financial assessment
• Immediate hands-on support
• We invest our own money
• We know the other sources of turnaround finance
• Statutory demand settlement
• Winding up petition solutions

Crisis Finance Hotline

020 7720 8000

Managing Critical Creditor Relationships

In turnarounds, creditors often have more influence than shareholders. Identifying and managing key creditor relationships is essential for securing finance and ensuring success.

Creditor Priority Assessment

Critical Creditors

HMRC, secured lenders, key suppliers - immediate action risk

• Can force insolvency proceedings
• Essential for ongoing operations
• Require immediate attention

Important Creditors

Major trade creditors, landlords - moderate pressure

• May withdraw credit facilities
• Could disrupt operations
• Negotiation often possible

General Creditors

Smaller trade creditors - manageable through negotiation

• Usually willing to wait
• Can be included in arrangements
• Lower priority for immediate attention

Creditor Management Strategies

Early Communication

Proactive contact before problems escalate

Consensual Agreements

Negotiated standstill and time to pay arrangements

Legal Protection

CVA, Restructuring Plan, or moratorium

Professional Intermediaries

Use specialists for complex creditor negotiations

Understanding Creditor Powers

HMRC Powers

• Present winding up petitions
• Field offices can seize assets
• Preferential creditor status
• 18-day response window

Secured Lenders

• Can appoint administrators
• Take control of secured book debts
• Call in loans on demand
• Remove access to bank accounts

Landlords

• Can forfeit leases
• Distrain against goods
• Require rent deposits
• Block property access

Unsecured Suppliers

• Can withdraw supplies
• Demand payment for new supplies
• May have reservation of title over goods
• Pursue debts through courts

The Time Pressure Challenge

Why Creditor Negotiations Take Time

• Multiple stakeholders with different interests
• Complex legal and commercial considerations
• Need for formal agreements and documentation
• Internal approval processes at creditor organizations

Reality Check: Meaningful creditor negotiations typically take 4-8 weeks, but turnarounds often have days, not weeks, to act.

Accelerating Creditor Support

• Engage experienced turnaround professionals
• Prepare comprehensive information packages
• Offer realistic and credible proposals
• Consider legal protection if needed

K2 Advantage: Our established creditor relationships and proven track record often accelerate negotiations and improve outcomes. If negotiations fail, we can quickly pivot to formal restructuring solutions like a Restructuring Plan.

Your Turnaround Finance Action Plan

Follow these critical steps to assess your options and secure the emergency funding your business needs for recovery.

1

Assess Urgency

• Review immediate creditor pressures
• Identify critical payment deadlines
• Calculate minimum funding required
• Prioritize most urgent obligations

2

Engage Specialists

• Contact turnaround finance experts
• Review available options
• Select appropriate lenders
• Prepare compelling applications

3

Prepare Documentation

• Update management accounts
• Prepare cash flow forecasts
• Document recovery strategy
• Gather asset valuations

4

Secure & Implement

• Negotiate terms and conditions
• Complete funding arrangements
• Pay critical creditors
• Execute recovery plan

Need Emergency Funding Now?

If you're facing statutory demands, winding up petitions, or critical cash flow issues, time is of the essence. Contact our emergency finance team immediately.

Emergency: 020 7720 8000 Get Emergency Assessment

Turnaround Finance FAQs

Common questions about securing emergency funding for distressed businesses

How quickly can turnaround finance be arranged?

Emergency funding can be arranged in 48-72 hours for urgent situations like statutory demands. More substantial facilities typically take 1-4 weeks depending on complexity and security requirements. Asset-based lending is generally faster than property-secured options.

What are the typical costs of turnaround finance?

Turnaround finance is more expensive than traditional lending due to the higher risk. Expect arrangement fees of 2-5% and interest rates of 1-3% per month. While costly, it's often the only option available and much cheaper than the consequences of business failure.

Can turnaround finance help if I've received a winding up petition?

Yes, emergency funding is often used specifically to settle debts behind winding up petitions. However, you must act quickly as the petition process moves fast. Contact specialists immediately to assess options and arrange urgent funding before the court hearing.

What security do turnaround finance providers typically require?

Security requirements vary by lender and amount. Common options include debentures over business assets, property charges, personal guarantees, or specific asset security. Some emergency funders can work with limited security if the business has clear recovery prospects.

Will using turnaround finance affect my credit rating?

Turnaround finance itself doesn't directly impact credit ratings, but the financial distress that necessitated it might already have caused damage. Successful use of turnaround finance to stabilize your business and meet obligations can actually help rebuild creditworthiness over time.

Should I take loans from multiple secondary lenders?

No. Taking multiple loans from different secondary lenders creates compounding personal guarantee risks and can put your home and personal assets at risk multiple times over. Each lender can independently pursue your personal assets, and the cumulative interest costs (often 1-3% monthly per lender) can become unsustainable. Always seek professional advice before taking on secondary lending, especially if you already have existing facilities.

What happens if I can't repay the Section 455 tax on my director's loan?

Section 455 tax debt is owed to HMRC and treated as a priority. Non-payment can lead to enforcement action including statutory demands and winding up petitions. The best approach is to use emergency funding to repay the director's loan before the nine-month-and-one-day deadline, avoiding the 33.75% tax charge entirely. K2 can help structure appropriate funding to clear director loans and avoid this burden.