YOUR COMPANY IS LOOKING FOR A TURNAROUND FINANCING SOLUTION!
Turnaround Business Finance Problems?
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Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
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FINANCING YOUR FINANCIAL RECOVERY
There are turnaround financing strategies that troubled companies can use to save themselves from dire straits and ultimate financial distress, regaining their former financial success. These same sort of strategies are valuable for business owners and financial executives to understand how their firms can avoid financial turbulence and failure.
BUSINESS FAILURES DON'T HAPPEN QUICKLY - BUSINESS TURNAROUND MUST HAPPEN QUICKLY!
We must first realize that business failure or bankruptcy never happens overnight. Normally there is a gradual trend of financial deterioration that is sometimes exacerbated by industry troubles. No doubt in the current 2020 pandemic environment many industries are unfortunately a poster child for troubled sectors of the Canadian economy - A seasoned management team recognizes that .
Naturally, firms that are on the very precipice of failure or bankruptcy do not have many options or time left. It has to fix itself, or sink. No business owners or entrepreneurs want to face bankruptcy, liquidation, and other creditor issues. That is where effective strategies around turnaround financing and the right loan amount and type of solutions come to play.
Do financially failing firms survive because of a revival in products or their services, or have they in fact executed on improved financial management. This is a challenging question because the very financial problems that beset a firm hinder it in getting new sales, acquiring inventory, and regaining supplier credibility.
BUSINESS CAN'T ALWAYS COUNT ON CANADIAN BANKS FOR RESCUE
Also, let's be realistic, banks and other finance companies do not throw themselves at failing firms with financial offers of loans, lines of credit, etc. to help you with that business turnaround. In fact what usually happens is that the company is forced to pledge some or all assets at much higher rates, sometimes simply accentuating the financial problems that were already there.
So what are the financial strategies that a firm can undertake to avoid financial failure when it has been losing sales, not generating profits, experiencing declining working capital, and generally travelling down a potential death spiral?
3 SOLID STRATEGIES FOR OVERCOMING BUSINESS FINANCE PROBLEMS AND SUCCEEDING IN TURNAROUND FINANCING
There are three or four solid strategies that can save the firm. The first is ' assets '. The second is liabilities and debt, and the third we will simply call 'manoeuvering'.
Strategy 1:
Assets have value. They can be sold, refinanced,, or pledged to secure new financing. This type of strategy works best when it works for all parties, the company and the lender, or the company and another firm. However, let's be clear that this is somewhat of a one-shot strategy. It either must work or it doesn't. Asset maneuvers have 3 stages of success: assets can be used to get a new loan, assets can be sold, or they can, in somewhat of a worst-case scenario, be liquidated.
Strategy 2:
On the other side of assets on the balance sheet is debt and equity. Debt can be structured properly to ensure the lender gets a reasonable reward, and the company is able to both repay and survive. There are too many types of debt to consider for the purposes of this article - suffice to say that creativity in debt is somewhat unlimited when it comes to cash flow and working capital solutions for key areas such accounts receivable funding & management .The balance sheet can be refinanced!
POTENTIAL FINANCING / REFINANCING STRATEGIES
A/R Financing
Inventory Loans
Access to Canadian bank credit
Non bank asset based lines of credit - business credit lines for the turn around
SR&ED Tax credit financing
Equipment / fixed asset financing
Cash flow loans
Royalty finance solutions
Real Estate Funding Solutions
Government Of Canada Small Business Loan Program - The Guaranteed federal business loan
A firm could issue debt, as an example, and repay only when the company is earning profits again. This would normally entail higher rates, but again, as we have stated, the transaction has to make sense both for customers and lenders. A solid alternative solution is to simply restructure existing debt at new rates and amortizations. At 7 Park Avenue Financial, we focus on preparing for our clients a business plan and cash flow projections that are realistic in terms of reinventing the capital structure and potential to increase liquidity.
Alternatively to debt a company with promise can bring in new equity or ownership. This is somewhat more risk for all as the dilution of ownership is usually significant when a company is failing and bring in new equity capital.
Strategy 3:
Many businesses recognize the need to look to the outside for help. Since the owners and managers are often too close to the problem it is somewhat of a classic case of not seeing the forest for the trees. Outside consultants and industry experts can often bring a solution to the table for many of the companies they work with.
They have insights that management simply did not possess. These strategies include developing new sales and product strategies, bring in new management, or considering a strategic merger to address the liquidity crunch.
CONCLUSION
In summary, anyone who has worked through several business cycles over a number of years knows that companies can in fact be saved via a solid restructuring plan . Some go on to be the new superstars of their respective industries with the right financing partner solutions. The company/business owner must clearly uncover what the problem is, and then adapt strategies, financial or otherwise, to fix those problems with existing lenders/new lenders.
Speak to 7 Park Avenue Financial, a trusted, credible and experienced financing partner and turnaround advisor who can assist you in the turnaround process funding needs. Let out team address the financial results you need to put in place.
FAQ: FREQUENTLY ASKED QUESTIONS
What is turnaround financing?
A business turnaround is a process of moving from one period of financial recovery into another. For example, a company may experience poor performance for an extended amount time before it begins to turn around financially and get back on track with revenue growth again.
What is debtor in possession financing?
The use of debtor in possession finance is a special kind of financial instrument that's only available to companies who have declared bankruptcy. This usually happens at the start of their filing, and it helps facilitate the reorganization process by taking care of all aspects relating to day-to-day business operations while in this difficult position.
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