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What is financial restructuring?

The financial restructuring of a company involves initiating a set of tailored measures to protect the owner from creditors and grant them the necessary time to rebalance their company's financial situation.

This process aims to find more suitable repayment solutions with creditors and is often accompanied by operational restructuring, which helps establish the necessary measures to revive entrepreneurial activity. It is therefore a reorganization of the company's obligations that will enable it to restore its finances and re-establish its productivity.

Negotiations between entrepreneurs and creditors can lead to the temporary reduction of interest rates, a decrease in the total amount of debts, or an adjustment of payment deadlines to allow the company the necessary time to recover.

There are two types of debt restructuring depending on the company's financial situation:

• A general corporate restructuring that is planned outside of an emergency situation, facilitating communication with creditors and thereby allowing for easy modification of payment terms and interest rates.
• Debt restructuring in a difficult situation requires effective negotiation with creditors and the use of services from a licensed insolvency trustee who will help you find appropriate solutions based on your financial situation.

How does debt restructuring work?

When a company faces financial threats and debt restructuring is being considered, it is necessary to engage a licensed insolvency trustee.

Restructuring experts work in close collaboration with their clients to evaluate all areas and aspects of the company and to develop the best possible strategy.

The process unfolds in two consecutive phases:

1. Analysis

It is essential to take the time to analyze all of the company's activities to detect the source of the financial problems it is experiencing. This analysis aims to establish an economic and financial diagnosis, through an in-depth study of the company's financial performance and operational management parameters.

This evaluation allows for an objective assessment of operational and financial dysfunctions, with the aim of implementing the necessary changes to improve the company's cash flow and performance.

2. Development of a recovery and corporate restructuring plan

This plan depends on the situation of each company and is implemented taking into account the financial and operational analysis previously established.

The Serpone Group experts assist you in implementing various measures with the aim of:

• Rebuild the company's equity
• Negotiate debt terms and conditions with creditors
• Refinance debts
• Establish a viable business plan

The financial restructuring plan requires a comprehensive approach aimed at restoring the company's cash flow and organization to revive its economic activities.

What are the benefits of debt restructuring?  

Debt restructuring helps find solutions when a company is accumulating losses, struggling to repay debts and pay bills, or experiencing recurring cash flow difficulties.

Its primary goal is to improve a company's financial situation, and it achieves this by allowing you to:

• Strengthen and stabilize the company's finances
• Implement an optimal financial structure
• Reduce debt to align with declared cash flows
• Negotiate more favorable loan terms
• Secure liquidity or investments to fund certain operations
• Enhance productivity and competitiveness
• Reduce the number of creditors and contacts
• Generate savings and stimulate growth
• Streamline management and communication
• Establish an appropriate business plan
• Enhance the company's operational flexibility.

Debt Restructuring vs. Commercial Bankruptcy

Debt restructuring has fewer consequences than commercial bankruptcy, which can cost thousands of dollars, even for small businesses. The current system aims to ensure financial obligations are met and does not protect companies that file for bankruptcy. Therefore, declaring bankruptcy should always be a last resort.

Debt restructuring demands significant time and effort for negotiations with creditors, various financial institutions, and suppliers, all aimed at reaching an agreement that aligns with your financial situation. This process can extend over several months.

Companies typically offer equity to creditors, who then accept a share of the business in exchange for part or all of its debt. Please note that depending on the cash flow situation and the strategies implemented, assets may become subject to the procedures of the Bankruptcy and Insolvency Act, and a request for a proposal or a bankruptcy filing may occur during this process.

A debt restructuring plan could save your business

When your business faces financial difficulties, debt restructuring allows you to create a debt relief plan and avoid commercial bankruptcy.

If you are able to repay your debts quickly, you may attempt to negotiate on your own. However, if you anticipate the process taking a year or more, it is advisable to work with a bankruptcy trustee, as it is a lengthy and stressful endeavor requiring multiple interactions with collection agents and creditors.

To ensure a successful financial restructuring, the Serpone Group assists you in establishing an informed business plan. Our team handles:

• Analyzing all payment terms with your creditors to determine which ones require restructuring.
• Studying cash flow to identify the company's losses and inflows.
• Establishing a detailed monthly budget and determining the amount you are prepared to allocate monthly towards debt repayment. If this amount is less than 8%, clients will find it challenging to negotiate this restructuring independently.
• Demonstrating the financial difficulties the company is currently facing.
• Negotiating with creditors to reduce the total debt amount or extend payment terms. Creditors may accept an offer or a counter-offer, and the negotiation process can span several months.
• Filing a proposal or declaring bankruptcy after necessary discussions with government agencies, with the aim of initiating appropriate procedures to save the company.

Contact your nearest branch to benefit from the advice and assistance of Serpone Group experts. You can receive a free and confidential consultation!

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