When a business reaches a critical point, survival may depend on restructuring and turnaround finance.

For many SMEs, the challenge is not that their business model is broken but that temporary shocks, over-leveraging or poor cash flow management have pushed them to the brink. Unexpected developments can also have a huge impact, with the recent increase in employers’ National Insurance contributions driving costs up for SMEs across every sector.

Turnaround funding provides the breathing space and capital injection required to reset operations and secure a sustainable future.

Why Turnaround Funding Matters

The need for turnaround funding has never been more pressing. Insolvency levels remain at highs not seen since the global financial crisis, while banks are reluctant to extend credit to businesses already in distress. Yet many SMEs facing liquidity problems remain fundamentally viable. Turnaround finance recognises this and offers a means to restructure, recapitalise and restore stability.

The current landscape for SMEs illustrates this urgency. Rising energy and employment costs plus ongoing supply chain disruption have left margins squeezed, particularly in manufacturing where input prices remain significantly above pre-pandemic levels. Many firms are contending with higher debt burdens as well, having borrowed heavily during Covid-era support schemes.

These pressures mean that businesses that are commercially sound may still need turnaround support simply to navigate their way back to stable trading.

Funding Options for Turnaround

Turnaround finance takes different forms depending on the severity of the challenge. Restructuring loans may be agreed with banks or other lending institutions to refinance debt, extend repayment schedules or allow temporary payment holidays. These measures ease immediate pressure and give management time to execute recovery plans.

However, these lenders are often reluctant to increase their exposure to businesses in difficulty. This is where alternative funders and private investors step in. Specialist turnaround funds and private equity firms target distressed but viable companies, bringing in both capital and operational expertise. Their approach is typically hands-on, combining investment with governance changes or new leadership to drive recovery.

For larger organisations, debt-for-equity swaps are a common tool in this space, allowing investors to reduce the debt burden while acquiring a stake in the business’s future success.

In some cases, formal insolvency tools such as Company Voluntary Arrangements or pre-pack administrations provide a structured way to reduce obligations while fresh funding is secured. These mechanisms are designed to protect core operations and jobs while resetting the business on firmer financial ground.

Successful turnarounds often blend several elements: owners may inject new capital of their own, landlords and creditors may agree to revised terms and a financing package from an alternative lender can supply immediate working capital. The goal is not just survival but repositioning the business for long-term health.

Turnaround Funding in Action

The value of turnaround funding is illustrated by several high-profile rescues.

Aston Martin, facing severe difficulties in 2020, secured new equity and refinancing through a private investor consortium. This not only stabilised the company but set it on a path to renewed growth. Likewise, McColl’s, the supermarket chain, was saved in 2022 when Morrisons stepped in with a buyout, preserving operations and stabilising debts. Such interventions demonstrate that with timely support, viable businesses can return from the brink.

These solutions may sound out of reach for SMEs, but options can be accessed for viable businesses at every stage and smaller-scale cases demonstrate this. Across the UK, mid-sized manufacturers and retailers have survived crises thanks to turnaround packages combining restructuring loans, debt rescheduling and investor equity.

These examples show that even when lenders step back, specialist funds can step in to support businesses that have strong fundamentals and viable markets.

“Turnaround funding is not a sign of failure, it is a sign of resilience. The key is securing support before a business runs out of options. At Pegasus Funding Solutions, we specialise in helping SMEs identify the right funding partners to give them a genuine second chance.”

– Richard Olsen, Pegasus Funding Solutions

Conclusion

Turnaround funding gives struggling but viable SMEs the chance to reset, restructure and rebuild. With the right advice and partners, businesses can move from crisis to recovery.

If your business is under financial pressure, Pegasus Funding Solutions can help you identify and secure the right funding lifeline. Contact us today for a confidential discussion.

www.pegasusfunding.co.uk/contact

Call: 0203 327 0567

Email: [email protected]