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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Direct Line = 416 319 5769
Office = 905 829 - 2653
Email = sprokop@7parkavenuefinancial.com
Turnaround restructuring financing in Canada is a classic ' survival ' strategy to fix... save a business. Numerous key aspects to the loan/borrowing process will help you construct the right solution. Let's dig in.
There no time more than in a ' turnaround ‘when confidence is needed in the view of any commercial lender. Simple basic concepts such as a realistic cash flow forecast become more important than ever. That cash flow forecasting, along with your ' plan ‘allows you to survive in the short term and plan for intermediate/long term.
In some cases your firm might be in that dreaded category of ' Special loans' at a Chartered bank. Here day to day cash will be managed both by yourself and your banker. In many cases we see clients are at the absolute top of their credit facility with no additional borrowing power in sight. Here is the time that most businesses must consider alternative financing as new business credit from existing banks/lenders is near impossible.
There are numerous, shall we call them ' non financial' attributes to owner/mgmt behavior in a turnaround. These include:
Mgmt depth/experience
Evidence of financial controls/ability to produce required information
Ability to work with new lenders/advisors
In the majority of turnaround cases new commercial lenders will replace current secured creditors. Never has there been more importance at this time to ensure assets are properly valued. These typically almost always fall into the categories of inventory, receivables, equipment and occasionally real estate. Various non financial assets might also play a role, i.e. patents, contracts, etc.
A large majority of turnarounds loans are in the category of ' ASSET BASED LENDING ‘, Your firm and the lender will focus on present assets and asset growth that will also demand more interim financing . Example - financing to cover off growth in sales/working capital requirements.
When constructing your turnaround process you can also assume that in some cases there might be more than one lender. Other lenders and include equipment financiers, A/R financing firms , bridge loan specialists, real estate lenders, etc .This whole process involves ' carving out ' specific security for specific specialized lenders.
As we have hinted the turnaround financing process has different timelines attached to it. Short term survival must be balanced by long term re-growth of your business. Suffice to say in the short term cash is king... controlling and managing it! Issues such as collecting receivables on time and focusing on payables mgmt are key. It's all about asset turnover of A/R and inventory. If vendor / supplier relationships are key to your success before they surely should be top of mind now.
In certain cases it also might be prudent to sell non core assets - this might be real estate or equipment. Naturally no required operating assets should be sold! While owners might be reluctant to pledge new outside collateral in some cases that comes under discussion.
If your firm requires ' turnaround ' expertise in any aspect of its business financing seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your restructure loan process needs.
Stan Prokop
