DEBT RESTRUCTURING?
All healthy businesses leverage their balance sheet. Good, productive debt ‘tends to be good for business. Until it’s not…
The current interest environment will cause even the lowest leveraged businesses to consider the impact of debt on cashflow and sometimes just gritting your teeth and getting through it is not the answer. If your cashflow is being impacted by a few features of the current economic environment, maybe it is time for a meeting with the bank to ease cashflow pressure via a debt restructure.
WHEN SHOULD A BUSINESS CHOOSE TO RESTRUCTURE DEBT?
Three questions to businesses with debt (good or bad):
Would the business benefit from reducing its monthly interest payments?
Would the business benefit from spreading the capital repayments over a longer period?
Would the business benefit from a cash injection?
If you have answered yes to any of the above questions keep reading. If not, go and grab yourself a cuppa and read the newspaper.
THE BENEFITS OF A DEBT RESTRUCTURE
Consolidating loans to make repayments simpler or to give certainty (i.e. downsizing the number of lenders and repayments needed to one (1) financial provider);
Lower repayment options (i.e. more favourable loan terms/lower interest and or principal repayment rates); and
Helps Grow the business (i.e. borrowing more money to help with purchasing new assets/equipment to help with expansion/next major project or development).
THINGS TO CONSIDER BEFORE CHOOSING TO RESTRUCTURE BUSINESS DEBT
Has the business complied with its debt obligations?
What is the current debt to equity ratio, and can the business sustain more debt?
What security has already been granted over the business assets?
What security has been granted over personal assets?
Are there any break fees to pay to the existing lenders?
The restructure plan may change depending on the answers to these questions and as the lender(s) will look at these in considering your application, we may as well get ahead of them before we make the call and set up the meeting.
HOW CAN iCLAW HELP WITH THIS PROCESS?
Liaise with the financial provider over requirements for the refinance;
Receive and review loan instructions/documents;
Prepare loan documentation for signing;
Arrange for releases of existing security and discharge figures (and discharge of mortgage(s) if applicable);
Check Personal Property Securities Register for any charges registered against chattels that will need to be discharged;
Preparing company resolutions;
On settlement, repay existing securities (and mortgage if applicable); and
Discharge of mortgage and/or register new security or mortgage.
If you think that your SME or business might benefit from a debt restructure, we would love to have a chat with you to see how this can be achieved. Please do not hesitate to contact Owen Culliney owen@iclaw.com or Gemma Martin gemma@iclaw.com or 07 929 43000 to make an appointment.