Bridging finance

During a formal restructuring process, evaluating a business’s fundamentals and financial position is essential to decide the best course of action. In some cases, it may benefit creditors to allow the business to continue trading despite financial challenges. This approach can enhance the company’s value, maximise creditor recoveries, or pave the way for a successful turnaround.
If trading is considered viable, an insolvency practitioner may be appointed as administrator to oversee operations. The administrator manages the business while exploring options to secure a buyer or restore its financial stability. This involves maintaining daily operations and implementing strategies to stabilise and improve the company’s financial position.
The decision to trade during administration is carefully considered, weighing the risks and potential benefits. Key factors include:
- The company’s cash flow and ability to generate revenue during trading.
- The likelihood of achieving a better outcome for creditors through continued trading.
- The overall feasibility of trading compared to immediate sale or liquidation.
When continued trading offers a realistic chance of achieving a better return than liquidation, it can be the most prudent option. However, this strategy depends on the availability of sufficient funds to support ongoing operations. Without adequate cash reserves or financing, sustained trading may not be possible. This is where bridging finance becomes crucial.