DEBT RESTRUCTURING
Debt restructuring is better known as a process that typically allows a private or public company, or a sovereign entity that is facing cash flow problems and financial distress in helping them to reduce and renegotiate its delinquent debts in order for them to improve or restore the liquidity so that it can continue its operations.
While corporate debt restructuring is defined as the reorganization of a company’s outstanding obligations, in which is often achieved by trying in reducing the burden of the debts on the company through the process of decreasing the rates paid and increasing the time the company has or need in order for them to pay the obligation back.
Typically, a restructuring transaction process is carried out in two very clear stages which will be the planning and implementation stages.
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Planning: The restructuring process is seen ready to begin as soon as the required company advisers have been appointed.
Stabilisation: During the initial stages of a transaction, priority will be given to identifying and remedying key pressure points within the company, and by reviewing existing debt agreements and other key contractual arrangements with all the investors. Once this process is finally complete, the preparation stage can however start to commence.
Preparation: The business is then reviewed and, if necessary, strategic and operational changes will also be suggested. The implementation of strategic and operational proposals is usually being carried out by consultancy firms and industry experts, while understanding the security holders’ motivations remains the strict responsibility of the company advisers.
Debt restructuring however can have many benefits for the future your business, giving you the enough time to do what is most important – which is growing your company.
1. Consolidate existing debts
Restructuring your company’s debt could really assist in reducing the number of monthly repayments that you have to keep track of by consolidating all these into one payment, making your life simpler and allowing you to focus in running your business.
2. Plan your finances more easily
Restructuring all your company debt into a single loan will definitely allow you to have time in making plans for your business’s future growth.
3. Lower interest rates
Consolidating your company’s existing debts might also mean that you will be paying with a lower interest rate overall, thus help in reducing the cost of finance to your business from outstanding loans.
4. Free up cash in your business
Restructuring these debts also might mean that you’re making lower repayments each month, freeing up some of your cash for running your business and enabling you business to grow.