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What is financial restructuring?

The financial restructuring of a company involves taking a series of measures to protect the owner from creditors, and giving him or her the time needed to rebalance the company's financial situation.

This process aims to find more appropriate repayment solutions with creditors, and is often accompanied by an operational restructuring that helps establish the measures needed to turn around the company's business. In other words, it's a reorganization of the company's obligations that will enable it to turn around its finances and restore its productivity.

Negotiations between contractors and creditors can result in a temporary reduction in interest rates, a reduction in the total amount of debt, or an adjustment of payment terms to give the company the time it needs to get back on its feet.

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

• A general restructuring of the company that is scheduled outside an emergency situation, facilitating communication with creditors and enabling payment terms and interest rates to be easily modified.
• Debt restructuring in difficult situations requires good negotiation with creditors and the services of a licensed insolvency trustee who can help you find the right solutions for your financial situation.

How does debt restructuring work?

When a company encounters financial threats and debt restructuring is being considered, a licensed insolvency trustee must be called in.

Restructuring experts work closely with their clients to assess all areas and aspects of the business and develop the best possible strategy.

The process takes place in two consecutive phases:

1. Analysis

We need to take the time to analyze all the company's activities in order to identify 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 business management parameters.

This assessment provides an objective view of operational and financial dysfunctions, with a view to making the necessary changes to improve the company's cash flow and performance.

2. Drawing up a business recovery and restructuring plan

This plan depends on the situation of each company, and is put in place taking into account the financial and operational analysis established beforehand.

Groupe Serpone's experts can help you implement various measures to :

• Rebuilding company equity
• Negotiate terms and conditions of debt with creditors
• Refinancing debts
• Draw up a viable business plan

The financial restructuring plan must benefit from a global approach that aims to turn around the company's cash flow and organization in order to relaunch its economic activity.

What are the advantages of debt restructuring?  

Debt restructuring is used to find solutions when a company is accumulating losses, is having difficulty repaying its debts and paying its bills, or is going through a period of recurring cash flow tensions.

Its main objective is to improve a company's financial situation by :

• Strengthen and balance company finances
• Set up an optimal financial structure
• Reduce debt to keep pace with declared cash flow
• Negotiate more favorable loan terms
• Obtain cash or investments to finance certain operations
• Improving productivity and competitiveness
• Reduce the number of creditors and contacts
• Saving money and boosting growth
• Simplify management and communication
• Draw up an appropriate business plan
• Improve the company's operational flexibility.

Debt restructuring vs. commercial bankruptcy

Debt restructuring has fewer consequences than commercial bankruptcy, which can cost even small businesses thousands of dollars. The current system is designed to ensure that financial obligations are met, and does not protect businesses that file for bankruptcy. Bankruptcy remains a last resort.

Debt restructuring requires a great deal of time and energy, which is devoted to negotiating with creditors and various financial institutions or suppliers in order to find common ground compatible with your financial situation. This process can take several months.

Companies generally offer equity to creditors. In this way, they accept a share of the company in exchange for some or all of its debt. Depending on the cash flow situation and the strategies deployed, assets may be subject to the procedures of the Bankruptcy and Insolvency Act, and an application for a proposal or declaration of bankruptcy may be filed during this process.

A debt restructuring plan could save your business

When your company is facing financial difficulties, debt restructuring enables you to draw up a debt relief plan and avoid commercial bankruptcy.

If you have the ability to pay off your debts quickly, you can negotiate them yourself. However, if you estimate a delay of a year or more, it's advisable to deal with a trustee in bankruptcy, as this is a long and stressful process that requires multiple meetings with debt collectors and creditors.

To ensure a successful financial restructuring, the Serpone Group helps you put in place an enlightened business plan. Our team will:

• Analyze all payment terms with your creditors to determine which ones need to be restructured.
• Study cash flows to determine the company's income and expenses.
• Draw up a detailed monthly budget and determine how much you are willing to spend each month to pay off your debts. If this amount is less than 8%, it will be difficult for customers to negotiate this restructuring on their own...
• Prove the company's financial difficulties
• Negotiate with creditors to reduce total debt or extend payment terms. Creditors may accept an offer or a counter-offer, and negotiations can last several months.
• File a proposal or declare bankruptcy after the necessary discussions with government agencies to initiate the appropriate procedures to save the company.

Contact the branch nearest you and benefit from the advice and assistance of Groupe Serpone's experts. A free, confidential consultation is available!

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