YOUR COMPANY IS LOOKING FOR TURNAROUND WORKOUT FINANCING!
Navigating Troubled Waters: A Guide to Special Loans and Turnaround Finance
UPDATED10/22/2025
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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
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"In the middle of difficulty lies opportunity." — Albert Einstein
Workout Financing in Canada: How Special Loans and Turnaround Financing Can Save Your Business
From Crisis to Clarity: Surviving a Called Business Loan
Your bank just called your loan. Panic sets in as you realize you have days, not months, to repay hundreds of thousands.
Operations freeze. Suppliers demand payment. Your business faces collapse. But there's a path forward.
Alternative lending solutions from firms like 7 Park Avenue Financial specialize in emergency refinancing solutions that can bridge the gap when traditional banks withdraw support.
The moment your bank notifies you they're calling your business loan, you enter a high-stakes race against time where the right financing partner can mean the difference between business survival and closure
3 Uncommon Takes
Loan calls often reflect relationship breakdowns, not business failure:
Banks sometimes call loans because of strained relationships, not weak finances. Missed reports, poor communication, or friction with your loan officer can trigger action even if financials are solid. Maintaining lender trust is as vital as managing cash flow.
A called loan can spark business growth:
Losing a bank loan can be a turning point. Many firms find new financing that better supports their model and growth goals. Alternative lenders offer flexibility and fewer covenants, often leading to stronger financial outcomes.
The real danger zone is the 90-day warning period:
Banks usually signal concern before a loan call through tougher reporting demands or credit scrutiny. Business owners who spot and address these red flags early can often prevent the call altogether.
Introduction: The Importance of Workout Financing
Workout financing in Canada is not about physical exercise—it’s about financial recovery. When business owners face the “Special Loans” situation, it can feel like bad news. The good news is that numerous turnaround financing options and loan workout strategies can help restore stability and protect your business.
Exploring Workout Financing Options
Traditional Financing in Place
Companies entering financial distress often already have traditional bank financing. Many are transferred to the Special Assets Group when loan performance declines. If your lender is focusing on calling your loan, this is the time to explore solid alternative financing options.
The Special Loans Category
Being placed in a Special Loans category may feel like limbo—or even purgatory. However, you’re still being financed by the bank, though often with tighter covenants, higher interest rates, and increased scrutiny. This temporary status offers a window to plan your next move.
Strategies for Resolving Financial Issues
This is your moment to take control of your financial situation. Identify whether the bank relationship can be fixed or if it’s time to exit. Develop a clear timeline and financing strategy to replace existing debt with new funding sources.
Possible Scenarios for Resolution
Your workout plan may include:
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New equity injection from owners or investors
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Sale of assets or business divisions to raise capital
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Enhanced personal guarantees to secure short-term lender confidence
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Balance sheet restructuring to realign short- and long-term debt obligations
When revising the balance sheet, demonstrate sustainable long-term cash flow to support any new financing.
Identifying the Root Causes
Every turnaround begins with understanding what went wrong. Business owners and stakeholders must identify the core issues behind financial distress.
Common causes include:
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Rapid or unmanaged growth
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Loss of major clients or contracts
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Breach of financial covenants (e.g., DSO, DPO, debt-to-equity ratio)
Identifying and correcting these problems is key to any successful turnaround.
Exploring Workout Financing Solutions
Alternative Financing Options
Many effective workout financing solutions exist outside traditional banks. These non-bank and asset-based structures are often faster and more flexible.
Options include:
| Criteria |
Bank Workout Financing |
Alternative Lending Solutions |
| Interest Rate Range |
Typically 7% – 12% (prime + risk premium) |
Ranges from 10% – 24% depending on asset quality and risk |
| Approval Time |
30 – 90 days; often delayed by internal reviews |
5 – 15 business days; faster decisions and funding |
| Collateral Requirements |
Strict; tied to hard assets and real estate |
Flexible; may include receivables, inventory, or cash flow |
| Flexibility of Terms |
Limited; governed by lender covenants and policies |
High; tailored repayment and structure options |
| Eligibility |
Requires strong financial ratios and covenant compliance |
Open to companies with weak credit or covenant breaches |
| Decision Authority |
Bank committees; slower and policy-driven |
Private lenders; quick and case-by-case decisions |
| Use Case |
Businesses seeking to remain within bank relationships |
Companies requiring immediate turnaround or bridge capital |
USE THIS HANDY BUSINESS LOAN CALCULATOR TO REVIEW DIFFERENT RATE AND PAYMENT STRATEGIES
ABC Company Case Study: Surviving a Bank Loan Call Through Strategic Refinancing
( FROM THE 7 PARK AVENUE CASE FILES )
Company: ABC Company, a 25-employee Ontario-based automotive parts manufacturer with $4.5 million in annual revenue.
Challenge: The company’s bank called an $800,000 term loan and froze a $300,000 operating line after two quarters of covenant breaches caused by a 28% revenue drop from a major customer bankruptcy. With full repayment demanded in 60 days, ABC faced an urgent cash flow crisis, supplier strain, and potential payroll failure. Traditional lenders declined due to default status.
Solution: Within 72 hours of the loan call, ABC engaged 7 Park Avenue Financial. The team structured a fast refinancing solution: an asset-based revolving facility of $350,000 secured by receivables and inventory, and a $500,000 equipment term loan. Funding closed in 16 days—before the bank’s deadline—with an interim advance ensuring uninterrupted payroll.
Results: Operations continued without disruption. The new financing provided 35% more working capital than prior bank facilities and stabilized cash flow. Within six months, revenue recovered to 95% of pre-crisis levels, supported by a more diversified customer base. Eighteen months later, improved financial strength enabled refinancing at lower rates. Management credits 7 Park Avenue Financial’s rapid response and alternative financing strategy for preserving the company’s future.
Key Takeaways
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Workout Financing provides critical support during financial distress.
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Special Loans offer restructuring flexibility under lender supervision.
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Alternative Financing fills gaps left by traditional lenders.
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Equity Injection and Asset Sales strengthen balance sheets.
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Professional Advisors ensure strategy alignment and lender confidence.
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Cash Flow Focus drives long-term business sustainability.
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7 Park Avenue Financial provides trusted Canadian expertise in Special Loans and turnaround finance solutions.
Conclusion: Business Restructuring and Turnaround Financing
When traditional financial solutions fail, specialized loans and turnaround funding offer a lifeline. Creative financing strategies can rejuvenate your business, restore cash flow, and position you for renewed growth and profitability.
Facing a Special Loans scenario?
Call 7 Park Avenue Financial—a trusted and experienced Canadian business financing advisor specializing in workout and turnaround financing.
FAQ
What are Special Loan solutions, and how can they help?
Special Loans are designed for distressed businesses. They provide options such as equity injections, asset sales, and restructuring to stabilize operations.
Why consider Turnaround Financing?
Turnaround financing resolves financial distress by restructuring debt, improving liquidity, and generating sustainable cash flow.
How can I identify the root causes of financial problems?
Examine areas like growth mismanagement, lost clients, or covenant breaches to pinpoint your business’s challenges.
What are the benefits of professional guidance?
Experts tailor solutions for your business, ensuring informed decisions that safeguard your future and strengthen lender confidence.
Can turnaround financing be done within the banking system?
Some solutions can, but most successful workouts use non-bank alternatives such as ABLs and bridge loans.
How long does turnaround financing take?
Timelines vary based on complexity—typically from several months to over a year. Bank-driven workouts may take longer.
Which industries benefit most from Special Loans and Turnaround Financing?
Manufacturing, retail, distribution, and service sectors frequently use these solutions to recover and grow.
How does bankruptcy differ from turnaround financing?
Bankruptcy is a legal process focused on liquidation or protection. Turnaround financing restructures operations to preserve and grow the business.
Are there tax implications?
Yes. Consult with financial professionals to manage tax outcomes tied to loan forgiveness, asset sales, or restructuring.
Can Special Loans fund expansion?
These loans are primarily for financial recovery. Expansion is better supported through traditional lending or equity capital.
What role does business valuation play in turnaround financing?
A current valuation establishes true business worth and viability, critical for attracting lenders or investors.
Statistics on Business Loan Calls and Defaults:
- Approximately 2-3% of Canadian commercial loans default annually during stable economic periods, with rates increasing to 5-7% during recessions (Bank of Canada data).
- 67% of small businesses report having personally guaranteed their business loans, exposing personal assets when loans are called (Canadian Federation of Independent Business).
- Businesses that engage alternative financing within 30 days of receiving loan call notice have an 80% success rate in replacing funding versus 45% for those waiting longer (Alternative Lending Industry Research).
- 40% of businesses facing called loans cite covenant violations rather than payment defaults as the primary cause (Equifax Canada Commercial Credit Trends).
- The average time from initial covenant violation to formal loan call is 90-120 days for Canadian businesses (Banking industry sources).
- Alternative lenders can close refinancing transactions 73% faster than traditional banks, averaging 14 days versus 52 days (Alternative Finance Review).
- 55% of businesses that successfully navigate called loan situations report finding better-suited financing terms than their original bank provided (Small Business Finance Survey).
CITATIONS
Citations on Business Loan Called by Bank:
Bank of Canada. "Financial System Review: Credit Risks in Commercial Lending." Bank of Canada. Last modified June 2024. https://www.bankofcanada.ca.
Canadian Federation of Independent Business. "Small Business Credit Conditions Survey." CFIB. Accessed October 2024. https://www.cfib-fcei.ca.
Equifax Canada. "Commercial Credit Trends Report." Equifax Canada. Last modified September 2024. https://www.equifax.ca.
Office of the Superintendent of Financial Institutions. "Commercial Lending Guidelines for Federally Regulated Financial Institutions." OSFI. Last modified March 2024. https://www.osfi-bsif.gc.ca.
Business Development Bank of Canada. "Alternative Financing Options for Canadian Businesses." BDC. Accessed October 2024. https://www.bdc.ca.
7 Park Avenue Financial ."Demand Loan Special Loans Servicing Solutions for Canadian Businesses" https://www.7parkavenuefinancial.com/demand-loan-special-loans-callable-loan-refinance.html
