Business refinancing solutions are often required when your company has been in the rise… and then unfortunately fall situation. Turnaround finance typically requires an asset loan of some type, in combination with performance changes in your business. Let’s dig in.
Challenges in the turn around abound, especially since in a turn around .especially when it comes to SME COMMERCIAL FINANCE needs, new equity/owner capital is often difficult if not impossible to acquire. So that lack of money must come from operating assets and sales. The ability to maintain sales and increase profits is of course also key.
Safe to say that owners/mgrs have to recognize the issues that arose prior to a turnaround need – they include issues such as costs in the business, mgmt/employee performance, or lower sales. Naturally those types of issues, combined with a poor asset and sales finance strategy are typically the key issues.
Key signs of a poor finance strategy being in place are your inability to buy new needed assets , inability to meet fixed cost commitments, and loan and lease default scenarios.
Many businesses get to the ‘ crisis ‘ situation without ever having prepared a proper business plan and cash flow plan. Suffice to say that now is the time to do that! That financial forecast and plan will determine where turnaround finance is needed and how it could be achieved. Those type of efforts will determine where cash will come from and how and when it will be used.
There is a great story around a fellow named Henry Frick – In 1871 he borrowed through good and bad times to acquire and grow businesses. His secret? It might well come from the actual bank notes from Thomas Mellon of Mellon bank – a bank U.S. money center bank . Those notes? They read ‘ land is good … the ovens are well built, manager on job all day… keeps books in evening… knows his business!
There often emerges a clear ‘ pecking order ‘ in who or what needs to be paid and addressed in a business refinancing. That list of key players is pretty short – government obligations, key suppliers, and utilities/rent!
For those customers with bank facilities in place they are of course forced to address the turnaround when a demand loan is called. An asset loan is often the solution that ‘ takes out ‘ the bank and provides an interim financing solution.
Turnaround finance Solutions that are available are diverse – They include:
Asset based bridge loan on assets
Asset based revolving credit facility – combines A/R, inventory and equipment and real estate into one business credit line
Tax credit finance
PO / Contract financing
Sale leaseback lease/loan on unencumbered assets
If your business is facing operating losses and other issues requiring business refinancing seek out and speak to a trusted, credible and experienced Canadian business financing advisor for help in asset loan and cash flow needs.