How Asset Based Lending Can Stabilise a Business Facing Liquidity Pressure

When a business begins to experience financial distress, the immediate challenge is often not profitability, but liquidity. Companies can be fundamentally viable yet still find themselves unable to meet payroll, pay suppliers, settle tax liabilities, or fund ongoing operations due to cash flow constraints.

Traditional lenders frequently become more cautious precisely when funding is needed most. Reduced overdraft availability, covenant breaches, declining profitability, or concerns over future performance can result in funding being withdrawn or restricted at a critical time.

However, administration, liquidation, or other formal insolvency processes are not always the only options available. For many businesses, there are alternative funding solutions that can provide the working capital needed to stabilise operations, support a turnaround plan, or facilitate a structured sale process.

Here are five funding solutions that businesses and insolvency practitioners should consider before formal insolvency becomes inevitable.

1. Asset Based Lending (ABL)

Asset Based Lending is often one of the most effective funding solutions for businesses experiencing liquidity pressure.

Unlike traditional bank lending, which tends to focus heavily on historic profitability and balance sheet strength, ABL facilities are primarily secured against business assets such as:

• Trade debtors

• Inventory

• Plant and machinery

• Property

• Other tangible business assets

As a result, businesses that have experienced recent losses or cash flow difficulties may still be able to unlock substantial funding if they possess a strong asset base.

Why ABL works in distressed situations

The key advantage is speed and flexibility.

As debtor balances increase, funding availability can grow alongside the business. This creates an immediate injection of working capital without requiring additional equity investment.

ABL can help businesses:

• Meet urgent payroll obligations

• Maintain supplier relationships

• Fund turnaround initiatives

• Support restructuring plans

• Avoid value-destructive insolvency processes

For insolvency practitioners, ABL can also provide valuable breathing space while strategic options are assessed.

2. Invoice Finance

Many distressed businesses have significant sums tied up in unpaid invoices.

Invoice finance allows companies to release cash from outstanding debtor books rather than waiting 30, 60, or even 90 days for payment.

Facilities typically provide access to a substantial percentage of eligible invoices shortly after they are raised.

This can be particularly useful for businesses that are:

• Growing rapidly

• Experiencing seasonal cash flow pressures

• Facing delayed customer payments

• Managing large contract-based revenue streams

For businesses whose primary challenge is working capital rather than underlying profitability, invoice finance can provide an immediate cash flow solution.

3. Refinancing Existing Assets

Many companies own valuable assets that are underutilised from a funding perspective.

Refinancing can unlock capital from:

• Machinery and equipment

• Vehicle fleets

• Commercial property

• Specialist operational assets

By releasing equity tied up within these assets, businesses can generate additional liquidity without diluting ownership.

This approach is often overlooked but can provide meaningful funding while management implements operational improvements or cost-saving measures.

4. Short-Term Bridging Finance

Where a specific event is expected to improve liquidity in the near future—such as a property sale, refinancing, investment round, or business disposal—bridging finance may provide a temporary solution.

Bridging facilities can help businesses:

• Cover short-term cash flow gaps

• Meet pressing creditor obligations

• Complete restructuring initiatives

• Preserve business continuity

However, bridging finance should only be considered where there is a clear and realistic repayment strategy, as costs can be higher than conventional funding.

5. Rescue and Turnaround Funding

Specialist lenders increasingly provide funding specifically designed for businesses undergoing operational or financial restructuring.

These facilities are often tailored to situations involving:

• Management changes

• Company Voluntary Arrangements (CVAs)

• Accelerated turnaround plans

• Distressed acquisitions

• Pre-pack transactions

  
  

Because specialist turnaround lenders understand distressed environments, they can often assess opportunities that fall outside conventional banking criteria.

For businesses with a credible recovery plan, this can provide critical support during a period of transformation.

Why Timing Matters

One of the most common challenges in distressed situations is that businesses seek funding too late.

As financial pressure intensifies, options become more limited. Suppliers tighten terms, creditors become increasingly concerned, and stakeholder confidence begins to deteriorate.

By engaging funding specialists early, businesses can often access a wider range of solutions while there is still time to implement corrective action.

Early intervention can preserve enterprise value, protect employment, maintain customer relationships, and significantly improve the prospects of a successful turnaround.

The Role of Asset Based Lending in Business Recovery

For many businesses facing liquidity challenges, the problem is not a lack of assets—it is a lack of access to the capital tied up within them.

Asset Based Lending offers a practical way to convert those assets into working capital, providing the flexibility needed to navigate periods of uncertainty and financial stress.

Whether supporting a turnaround strategy, facilitating a refinancing, or helping a business avoid formal insolvency altogether, ABL can often provide the breathing space required to regain stability and create a path forward.

In distressed situations, funding should not be viewed solely as a last resort. When deployed at the right time, it can be the difference between a successful recovery and a formal insolvency process.

ALL Capital supporting UK Business

We work closely with business owners, advisers, accountants, and insolvency practitioners to identify funding solutions for companies facing cash flow pressure, restructuring challenges, or lender fatigue. By unlocking capital tied up in business assets, we help create the time and flexibility needed to evaluate recovery options, implement turnaround plans and maximise stakeholder value.  ALL Capital can use springing covenants whereby the financial covenant(s) are only tested if undrawn liquidity in the facility falls below an agreed target.  This gives management space to focus on operational restructuring actions which may have an adverse impact on short term profitability and cash flow ahead of securing long term benefit.