Reasons for Restructuring
There are many reasons to consider a restructuring
such as:
* Replacing short term leases with loans that have a longer amortization schedule. This change will reduce the monthly payments and perhaps reduce the interest rate. It may also allow the company to begin depreciating the equipment rather than simply make lease payments.
*Converting the frozen balance on a line of credit into a term loan that is paid out over several years. Terming out the balance will increase working capital, and it may free up the line of credit to support operations. It will also help you repay a loan that has been on your books for too long.
*Obtaining a new bank or asset based lender in order to get a higher advance rate on collateral. Perhaps your current bank will only give you an advance rate of 75% of accounts receivable that are less than 60 days old or only 40% on finished goods. Perhaps it will only give a 75% advance rate on your property and equipment. A new lender might offer you higher advance rates.
*Obtaining a new bank or asset based lender to get better terms. Perhaps your current lender limits the amount that it lends against certain customers or disqualifies certain accounts receivable as ineligible. Perhaps it limits the size of your line of credit even though you have the collateral to support a larger loan. Again a new lender might be able to improve your existing terms.
*Consolidating multiple loans into one loan that has smaller fixed payments.
*Replacing your current lender, because it refuses to lend you more money even though you have the capacity to borrow more funds.
* Replacing short term leases with loans that have a longer amortization schedule. This change will reduce the monthly payments and perhaps reduce the interest rate. It may also allow the company to begin depreciating the equipment rather than simply make lease payments.
*Converting the frozen balance on a line of credit into a term loan that is paid out over several years. Terming out the balance will increase working capital, and it may free up the line of credit to support operations. It will also help you repay a loan that has been on your books for too long.
*Obtaining a new bank or asset based lender in order to get a higher advance rate on collateral. Perhaps your current bank will only give you an advance rate of 75% of accounts receivable that are less than 60 days old or only 40% on finished goods. Perhaps it will only give a 75% advance rate on your property and equipment. A new lender might offer you higher advance rates.
*Obtaining a new bank or asset based lender to get better terms. Perhaps your current lender limits the amount that it lends against certain customers or disqualifies certain accounts receivable as ineligible. Perhaps it limits the size of your line of credit even though you have the collateral to support a larger loan. Again a new lender might be able to improve your existing terms.
*Consolidating multiple loans into one loan that has smaller fixed payments.
*Replacing your current lender, because it refuses to lend you more money even though you have the capacity to borrow more funds.
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