Restructuring and Refinancing
WITH INCREASING FREQUENCY, many companies—especially small businesses, which are often more susceptible to changes in market demand and credit constrictions—find their current loan payments too much to handle. One of the best solutions to this dilemma is to restructure outstanding loans to reduce monthly or quarterly payments. Unfortunately, this isn’t always possible. When a company has become so mired in excess costs and dropping market demand that there isn’t time to restructure, the logical solution is the bankruptcy court. The last chapter touched on some of the issues involved in filing for bankruptcy; you can find a fuller discussion of developing strategies to tackle a bankruptcy filing in my book The Complete Book of Raising Capital (McGraw-Hill).
This chapter is devoted entirely to methods for restructuring loans (otherwise known as recapitalizing) and refinancing a small company. If you’re not in a cash bind, if your debt obligations are not depriving you of needed cash to expand your business, or if conditions are such that you can delegate the responsibility for handling these matters to another person, then this chapter may be of no interest to you. But if you are in a cash bind now because of overburdening loan payments, or you think you might be in the foreseeable future, then this chapter should give you a good background in proven techniques for managing the situation.
You have probably already tried everything you can think of to free up cash. Your cash management program is in place. You have a working cost-reduction program. You’ve tried your bank for additional