A Second Chance At Success: The Benefits of Debt Restructuring

capital corp merchant banking, debt restructuring, corporate debt refinancing
Debt refinancing can help you grow your business, hire employees, and return a positive cashflow

Due to the start of the 2008 financial crash that has gone on to lead the world into a new depression, Banks have forced companies to substantially reduce their credit lines and/or long-term debts.

In fact, as a result of the “Crisis” the overall value of numerous companies’ assets (ex: land, building/property, equipment, etc) have decreased by as much as 50% – depending on the assets.  Because of this, banks felt “exposed” and asked their clients to reduce their indebtedness.

Now there is nothing wrong with that approach – except that the money a company uses to reduce its debt means that it will not have it to expand, go after new business ventures, hire new employees, or carry out research and development (R&D). Not to mention that this creates a major stress factor on the company’s working capital (the working capital is defined as the day-to-day money needed to operate).

Consequently, wether those companies are production plants, hotels, motels, resorts, golf courses, private hospitals, research laboratories ect… the point is that the financial pressure on those businesses have been enormous, and lots of them have been looking on the market for financial help and can rarely find it – or they’ve had to deal with voracious (that’s right, we said it!) Venture Cap people taking advantage of the situation to literally acquire control of some companies. It’s especially hard when sometimes these companies or business have been in the same family for more than 100 years, and then have to pump from their own resources the money the company could not obtain from its bank.

Having said all that, what we’ve been offering (and are now openly announcing) is financial relief by way of refinancing existing mortgages (commercial or industrial). In refinancing the mortgages, then the outstanding amount can be increased so that working capital money can be injected into the Company.  What can also become a possibility when refinancing a mortgage is to combine to that funding any outstanding equipment finance loans or lease, once again creating automatic positive working capital for the company.

Concerning the “Cash Flow” (the cash flow being the money a company needs to make its monthly payments on its debt). Once again it can be improved several ways but the most common way is 1) To refinance and consolidate the existing debt in granting a longer amortization period or 2) By way of equity Injection, which is like giving a blood transfusion to the company, taking in consideration its actual financial situation and its development for the next 3 to 5 years.

Once again, regardless of the nature of the business the company is in, the similarities are obvious – thus the needs are very similar as well and when it comes to debt restructuring the core elements of any given deal are 1) good product, 2) good market, 3) good management, 4) positive history (before the crisis) 5) strong potential for development and 5) an honest track record.

If a company regroups those Core elements, there is no reason why a financial restructuring could not be executed in a very timely manner.

As always, please make an informed decision in all matters,

The Capital Corp Team

4 thoughts on “A Second Chance At Success: The Benefits of Debt Restructuring

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