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Special Loans And Workout Financing In Canada: Turnaround Just Around The Corner
Revive Your Business: Special Loans and Bank Workout Financing Solutions



Navigating Troubled Waters: A Guide to Special Loans and Turnaround Finance

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special loans and workout financing in a business turnaround via 7 Park Avenue Financial financing solutions



Read on because Special Loans and Turnaround Financing hold the key to your financial revival!



Introduction: The Importance of Workout Financing

Workout Financing in Canada: As we all know, there's nothing like a good workout! When we meet with clients who find themselves in the bad news ' situation, namely ' Special Loans, ‘it’s always good to know that the good news is the numerous turnaround finance alternatives and loan workouts available to owners/managers/shareholders. Let's dig in.



Exploring Workout Financing Options 


Traditional Financing in Place


We're assuming that firms requiring the turnaround have traditional ' bank' type financing in place and might be in the special assets group at the bank. When it's obvious that your current lenders, bank or otherwise, are focusing on calling your loan, there is no better time to start looking at solid alternatives.



The Special Loans Category 


In the case of banks calling a loan, there is another piece of ' good news' around being put in the special loans category. There's no better example of the word ' limbo ' than the bank special loans category in Canada. Business owners/managers might well always want to change that working to ' purgatory. ‘ However, at the end of the day, you are still being financed under the bank with loan payments due, albeit at a higher rate and tighter covenants and restrictions.



Strategies for Resolving Financial Issues 


Here is your time to take a bit more of a ' stance ' on your overall finance situation - identifying a fix with the bank or agreeing on a time and exit strategy - new finance in place!


Possible Scenarios for Resolution


That ' fix ' with your bank or other commercial lender might include several scenarios:

1. New Equity from Owners

2. Sale of Certain Assets or Parts of the Business

3. Higher Levels of Personal Guarantees

4. Re-doing the Balance Sheet


Re-doing the balance sheet vis-a-vis short and long-term debt obligations - Here, your company clearly must demonstrate viable long-term cash flow generation when new forms of debt are considered.


Identifying the Root Causes


So what happened? That's the legitimate question that owners/managers and other stakeholders ask around the downslide of your firm's financial health. Here numerous scenarios abound -


We've met with many owners who offer some interesting versions of their current financial problems. In some cases, their information is correct, just being managed improperly. Examples: ' We've grown too fast '; ' Lost a big contract/client, ‘' We're out of covenant on some of our operating metrics - i.e. DSO, DPO, Debt to Equity.



Exploring Workout Financing Solutions


Alternative Solutions


Numerous workout financing turnarounds can be implemented. They can be done within the banking system, but more often than not, they involve alternative solutions – that includes:


- Asset-based Lending / ABL Non-Bank Credit Lines / Accounts Receivable Finance

- Bridge Loans

- Sales Leasebacks

- Cash Flow Loans – Secured/Unsecured

- Real estate workout financing - structured loan payment  via a bridge loan solution




Key Takeaways 


  1. Special Loans: These are financial arrangements that signal distressed situations
  2. Workout Financing: Strategies used to resolve financial distress.
  3. Alternative Solutions: Options beyond traditional banking for turnaround such as the asset based loan revolving credit agreement
  4. Equity Injection: Owners investing more capital into the business.
  5. Asset Sales: Disposing of certain business assets.
  6. Personal Guarantees: Increased personal liability for financing in loan documents
  7. Balance Sheet Restructuring: Adjusting debt obligations to reflect cash flow meeting monthly payments
  8. Identifying Causes: Finding root reasons for financial decline.
  9. Cash Flow Generation: Ensuring long-term sustainable income under current interest rates
  10. Professional Guidance: Seek experts for tailored solutions in a workout agreement



Conclusion:  Business Restructuring and Turnaround Financing


When standard financial solutions fall short business owners must seek out specialized loans and turnaround funding - Creative turnaround financing puts new life in the business and allows them to refocus on a path back to growth profits and positive cash flow when undertaking and understanding bank workout agreements.


If you’re looking to have a solid workout on your financing turnaround and workout strategy call 7 Park Avenue Financial,  a trusted, credible and experienced Canadian Business Financing Advisor who can assist you with a SPECIAL LOANS scenario and workout support that fits your situation.





What are Special Loan solutions, and how can they benefit my business?

Special Loans are financial tools designed for distressed situations in the workout process, offering options like equity injection and asset sales to stabilize your business.

Why consider Turnaround Financing?

Turnaround Financing provides strategies to resolve financial distress, including restructuring balance sheets and generating sustainable cash flow.

How can I identify the root causes of my business financial problems?

Investigate factors like rapid growth, lost contracts, and covenant violations to pinpoint the reasons behind financial decline.

What are the advantages of seeking professional guidance in financial recovery?

Experts can tailor solutions to your situation, ensuring you make informed decisions and secure your business's future when in a situation revolving around bank workouts

Can Turnaround Financing solutions be implemented within the banking system?

 While some solutions can be, more often, alternative options like Asset-Based Lending and Bridge Loans are considered.

How long does it typically take to execute a turnaround financing plan?

The timeline for commercial loan workouts varies depending on the complexity of the situation but can range from several months to a year or more. Bank workout strategies can take much longer if the bank is participating.

What industries benefit the most from Special Loans and Turnaround Financing?

These loan workout solutions are applicable to a wide range of industries facing financial challenges, including manufacturing, retail, and services.

How does bankruptcy differ from turnaround financing, and when is it a better option?

Bankruptcy involves a legal process, whereas turnaround financing and business loan workouts aim to restructure and save the business. The choice depends on the severity of financial issues.

Are there tax implications associated with Special Loans and Turnaround Financing?

Tax consequences can arise, so it's essential to consult with financial professionals for professional financial advice to understand and manage any potential tax issues.

Can Special Loan Solutions be used to fund expansion plans?

Special Loans are primarily designed for financial distress situations. If expansion is the goal, traditional financing or equity investment might be more suitable.

What is the role of a business valuation in turnaround financing?

 Business valuation helps determine the true worth of your business and assess its viability, which is crucial when considering financing options and a new loan facility


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Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil