How to Assess Your Business’s Financial Health for Business Rescue Finance

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An honest assessment of your company’s financial health makes a big impact when seeking business rescue finance. This analysis brings your strengths and growth potential to light, allowing you to create a convincing proposal for lenders and investors. Transparency in your financial situation builds confidence, encouraging support from those interested in your vision. Below is a rundown of the financial areas you should explore.

Cash Flow

Understanding cash flow management helps keep the business on solid ground. 

Reviewing cash flow statements reveals whether you generate enough income to handle everyday costs like employee salaries and utility bills. A negative cash flow suggests an issue, meaning expenses exceed revenue. If relying on credit or waiting too long for payments from suppliers feels familiar, then exploring post-commencement finance in your role as a business rescue practitioner might be the answer.

Taking a closer look at your cash flow cycles helps pinpoint problem areas. For example, if payments from clients take too long or supply costs rise unexpectedly, cash flow may suffer. Monitoring these details allows you to determine whether short-term financial support is the solution or if deeper structural changes are necessary.

Profit Margins

Profit margins paint a clear picture of how well a business translates sales into profit. Evaluating these margins allows for an understanding of profitability levels and operational efficiency. Gross profit margin indicates how well production costs align with sales revenue. A declining figure may point to rising costs or inefficiencies in production practices.

Operating profit margin takes into account other operational expenses beyond production, offering a broader perspective on cost control. A decrease here may highlight the need for operational adjustments. 

The net profit margin is the final piece of the puzzle, reflecting the overall profitability after all expenses. A strong net profit margin shows potential for reinvestment and sustainability, which can be appealing to potential investors.

Lenders will closely scrutinise these margins when reviewing applications for business rescue finance. Clear and compelling profit margins indicate that your business has the potential to rebound and thrive.

Debt Levels

Evaluating debt levels when looking into business rescue finance brings clarity and direction to the recovery process. 

The debt-to-equity ratio helps highlight your reliance on borrowed funds versus your ownership equity. A higher ratio points to a significant dependency on loans, which might concern those interested in providing financial support.

Interest coverage provides further insight by comparing your earnings before interest and taxes to your interest obligations. A lower ratio suggests potential challenges in making those interest payments, which may influence lenders’ choices.

Looking at your repayment schedule is also wise. If payments are on the horizon, this urgency can lead you to pursue business rescue finance options sooner, particularly since existing debts can complicate your cash flow.

Payment History

The business’ payment track record with suppliers, creditors, and lenders says a lot about its financial management. 

A strong payment history demonstrates reliability and can enhance your credibility with potential lenders. Conversely, late payments or defaults can signal financial instability and deter financiers.

To assess your payment history effectively, review invoices, statements, and agreements over the past year. Look for patterns in late payments or instances of renegotiation, as these may indicate underlying cash flow issues or strained relationships with suppliers and creditors. 

Open communication with these stakeholders is also beneficial, as addressing payment challenges transparently can foster goodwill and potentially lead to more favourable terms in future financing agreements.

Financial Stress

A good look at your financial health mean you'll be able to recognise one-time versus persistent strains.

Temporary issues often arise from unusual events, such as natural disasters, sudden market changes, or unexpected losses. These situations usually resolve without long-term effects on your business operations.

Ongoing struggles tell a different story, particularly if you’re facing negative cash flow. Regularly seeing cash drain faster than it comes in signals a bigger issue within the business model. A close examination of your financial records can identify the root causes.

Our Recommendation On Seeking Business Rescue Finance


Understanding where your finances stand prepares you for conversations about business rescue finance. This clarity helps you present your situation convincingly to lenders when the time comes.

When you’re ready to apply for business rescue funding, Geddes is ready to assist. Schedule a free consultation with us so we can explore your situation in detail. We’ll evaluate the options and assist you with securing funding to kickstart your turnaround.


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