The word restructuring is synonymous with bankruptcy, but what if it can simply be a company checkup? What advice can a professional who has been there give to the business owner, lender, attorney, or other looking for help? A business can do all of the right things and still struggle. Great minds can create great ideas and still become victims of a waning economic position, while even the greatest are not immune to unforeseeable calamity. This is the way of the professional. Restructuring officers are seen as the bulldogs who come into a company, fire everyone above a certain level, and lay waste to the infrastructure to create an efficient skeleton that will continue for a few more years until the inevitable liquidation or fire sale.
Why Companies Should Consider a Restructuring Advisor
1. To understand what you have
The best way to avoid financial problems is to understand your business’s finances well. This includes knowing your income statement, balance sheet, and cash flow. For some business owners, this can be daunting, given that they are usually involved in all aspects of the business – from sales to customer service and manufacturing to human resources.
A restructuring advisor can help you get a handle on your finances. They can help you understand your financial statements, identify areas where you can save money, and develop a plan to improve your cash flow. If you don’t have an expert regularly looking at your books, it’s worth finding one, as most advisors will tell you that if you don’t understand your business’s financials, you won’t be able to keep lenders informed of changes in your financial situation which could result in a covenant default.
2. To know your industry better
A restructuring advisor can help you stay up-to-date on the latest industry trends and issues. For example, if your business relies on foreign trade from China, a restructuring advisor can help you understand the latest trade agreements between the US and China. If your industry is home-schooling, a restructuring advisor can help you understand the latest legislation affecting home-schooling families. By staying up-to-date on the latest industry trends and issues, you can make better decisions for your business and avoid costly mistakes. If you do not know your industry and the trends that are shaping it, you could easily make decisions that lead to failure.
3. To avoid obstacles and setbacks
Restructuring advisors are not just there to help companies through bankruptcy. They want to help companies avoid bankruptcy altogether. The best clients for restructuring advisors are those who are willing to work with them to identify and fix problems before they become too big. A restructuring advisor can help you find weak spots in your company, identify redundancies, and uncover new opportunities. By working with a restructuring advisor, you can improve your company’s chances of success and avoid the pain of bankruptcy. This could lead to a relationship that will benefit you and your business for decades.
What if Bankruptcy is Unpreventable?
In the past, restructuring was a long and drawn-out process that often ended in bankruptcy. But now, thanks to new technology, restructuring can be a more efficient and effective process. This has led to a rise in out-of-court restructuring, where banks and companies work together to find solutions outside of the bankruptcy court. In an out-of-court restructuring, banks are more likely to work with companies to correct covenant defaults or violations of the terms of a loan agreement. This is because banks are often reluctant to go through the lengthy and expensive bankruptcy process. Because of the recent failure of several banks, banks may be simultaneously tightening their liquidity belts and giving their clients as many opportunities as possible to correct the ship.
The winners in this new environment will be those companies that can successfully turn themselves around before needing to file for bankruptcy. By working with a restructuring advisor, companies can develop a plan to address their financial problems and emerge from restructuring stronger than ever before.
Conclusion
The first call in a possible default or bankruptcy situation should always be to a qualified restructuring professional. The restructuring professional is an advisor with the skills, experience, and contacts to guide a company through troubled waters. They are committed to ensuring the business owner’s life work is not brought down by a single economic event. If you currently find yourself in desperate need or see clouds on the horizon, consider engaging an expert from Calvetti Ferguson.
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