YOUR COMPANY IS LOOKING FOR TURNAROUND FINANCING SOLUTIONS!
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Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Turnaround funding emerges as a powerful solution for companies seeking to transform financial distress into sustainable success.
"Breathe new life into your struggling business with turnaround funding – the financial CPR for companies on the brink."
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer Turnaround funding and working capital solutions – Save time and focus on profits and business opportunities
7 Park Avenue Financial: “Canadian Business Financing with the intelligent use of experience”
TURNAROUND FINANCING IN CANADA
Corporate turnaround business financing involves fixing major problems in a Canadian business. ABL asset-based financing is one of the best solutions for ' the fix '. Let's explain why, so let's dig in.
Turnaround financing provides a financial lifeline for businesses experiencing financial challenges. Let the 7 Park Avenue Financial team show you proven methods of refinancing your business to achieve new success.
Shocking statistic: According to a study by the Turnaround Management Association, only 30% of businesses that receive turnaround funding successfully complete their restructuring and return to profitability within five years.
Turnaround Funding: Fixing What Went Wrong in Business Financing
Top experts will agree that there is nothing more challenging than a turnaround - in effect, it's a ‘ renewal ‘ of a business, and financing will not always, but more often than not, play a major role in that renewal.
Turnaround services are crucial in assisting businesses facing financial and operational challenges by providing tailored solutions and strategic financial planning. Going through that whole process is also a tremendous way to understand ‘ what went wrong ‘, and as we’ve said many times:
‘Tuition is very costly in the school of experience.’!!
4 KEY ISSUES IN TURNAROUND FINANCE
During a ‘turnaround,’ several major issues tend always to come up - they include areas such as:
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People issues
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Rightsizing the company to allow it to grow again
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Address legal issues that might even include a protection filing under Canada’s CCAA process (It’s the equivalent of Chapter 11 in the United States
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The need to restructure business debt / working capital needs
Business restructuring addresses these financial and operational challenges by providing tailored solutions for optimizing performance, managing risks, and implementing strategic plans to restore financial stability and stakeholder value.
We’re focusing primarily on financing here, but it’s safe to say many other issues will always come into play. Also, we’re predominantly talking about an ‘operating’ turnaround instead of some of the ‘strategic’ issues involved in products, markets, engineering, etc.
HOW DOES ' ABL ' ASSET BASED LENDING HELP A TURNAROUND WITH CASH FLOW?
ABL… It’s the acronym for asset-based lending, which helps address the 3 critical areas of corporate turnaround business financing - sales revenues, cost issues, and asset management and finance issues.
Alternative lenders are crucial in providing ABL solutions for turnaround financing, especially when traditional bank loans are not an option. It’s simply one key effective solution that allows a firm's financial restructuring to be completed.
THE ALTERNATIVE TO NEW OWNER EQUITY
An asset-based line of credit is all about refinancing growth when equity issues are strained.
Flexible funding is crucial in these situations, as it provides the necessary support for addressing equity issues and fostering growth during a turnaround.
While it's more often than not an operating facility that encompasses all the company's assets, it can also, when applicable, include a term solution complementary to the company's overall long-term needs.
ASSET BASED LOANS ARE PRIMARILY FROM ALTERNATIVE LENDERS
It should be pointed out that typically an ABL business credit facility is a non-bank solution that supports a broad range of challenges and industries.
(NOTE - Some banks offer ABL financing but the why and how of that is a subject for another day)
THE COST OF FINANCING
ABL is sometimes priced as competitively as a bank solution - we will call those TIER 1 asset financing.
Still, most firms requiring a turnaround will typically pay a major premium to bank pricing because of the inherent credit and perception challenges involved in a turnaround.
Assessing the balance sheet's status is crucial in these scenarios, as a strong and stable balance sheet can facilitate effective turnaround strategies despite cash generation limitations.
ASSET BASED LOANS ARE ALL ABOUT YOUR SALES AND ASSETS
The essence of the ABL turnaround solution is financing all the firm's business assets, maximizing its borrowing power.
The restructuring process is crucial in supporting financial restructuring through asset-based lending (ABL), allowing companies to stabilize and improve operations while managing their financial restructuring.
Typically, accounts receivable are financed at 90% of their ongoing value, inventory is margined at anywhere from 25-75%, and the unique part of the ABL solution is the ability to carve out the fixed assets/equipment of the business and include them in the borrowing power mix.
Company-owned real estate can also be included as a part of the asset-based loan, further enhancing working capital access.
DUE DILIGENCE IN BUSINESS RESTRUCTURING
Typical requirements to get the ABL solution in motion include due diligence around the business assets, the firm's ability to prove it can provide ongoing financials, a long-term cash flow and sales forecast, etc.
Collaborating with the management team is crucial in securing and implementing turnaround financing. They are key in identifying financial issues, developing strategic options, and executing solutions to restore financial performance, especially in challenging and urgent situations.
KEY TAKEAWAYS
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Capital injection serves as the cornerstone of turnaround efforts, providing much-needed liquidity.
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Restructuring operations often involves streamlining processes and cutting unnecessary costs.
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Debt renegotiation with creditors can alleviate immediate financial pressures on struggling businesses.
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Strategic repositioning helps companies identify new markets or products to revitalize their business model.
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Effective cash flow management ensures optimal allocation of resources during the turnaround process.
CONCLUSION - NEW LIFE INTO YOUR BUSINESS WITH EXPERT TURNAROUND FINANCE SOLUTIONS
If your company needs to address corporate turnaround business financing, consider ABL as one method of quickly implementing the solution. Those dwindling options you thought of suddenly emerge with a clear, viable solution that’s alternative in nature but has proven to work well for thousands of firms.
To attract turnaround funding, it is crucial to demonstrate that your company is a viable business with a solid operational foundation and experienced management.
Call 7 Park Avenue Financial, a Trusted, credible, experienced Canadian business financing advisor who can assist you with financing when needed.
FAQ
How is turnaround funding different to traditional funding?
Turnaround funding is designed for struggling businesses. It has more flexible terms and a higher risk tolerance than traditional funding. It provides capital to implement changes and improve the business rather than just paying the bills.
What types of businesses can use turnaround funding?
Any business in distress or at risk of bankruptcy can use turnaround funding. It can be in any industry, any size, or any stage of decline as long as it has the potential to recover and a viable turnaround plan.
How long does it take to get turnaround funding?
The timeframe for getting turnaround funding varies depending on the situation and the lender’s due diligence process. In emergencies, some lenders can fund in a few weeks, but in more complex situations, it can take several months to finalize.
What’s the role of management in getting turnaround funding?
Management plays a big part in getting turnaround funding. Lenders will assess the management team’s ability and deep understanding of executing the turnaround plan in the business plan. In some cases, hiring turnaround specialists such as 7 Park Avenue Financial to identify potential lenders or changing management may be required to get funding and, in most cases, get the company back on track.
How does turnaround funding affect existing stakeholders?
Turnaround funding affects existing stakeholders. While it’s a chance for the business to recover, it may dilute ownership, restructure debt or change management control. However a strategic plan rescue financing is often a better option for all parties than bankruptcy.
What’s AR financing, and how does it work?
Accounts Receivable (AR) financing allows businesses to borrow against their outstanding invoices. The financing company provides an advance on unpaid invoices, usually 70-90% of the value, so companies can get immediate cash flow.
Are there industry restrictions for AR financing?
While AR financing is available across many industries, some may have restrictions or higher fees due to risk. Industries with long payment cycles or high chargeback rates may find getting good AR financing terms harder.
How is AR financing different from factoring?
AR financing and factoring are similar, but factoring involves selling the invoices to a third party, while AR financing uses the invoices as collateral for a loan. Factoring usually includes collections, while AR financing leaves invoice management to the business.
What are the costs of AR financing?
AR financing costs include an advance rate (a percentage of the invoice value provided upfront) and a factor fee (a percentage of the total invoice amount). Additional fees may apply for credit checks, wire transfers, or extended payment terms.
How long does it take to get funded through AR financing?
Funding through AR financing can take different times, but many providers offer same-day or next-day funding once an account is set up. The initial setup and approval process can take a few days to a week, depending on the complexity of the business and its invoicing structure.
What do lenders look at when evaluating turnaround funding candidates?
Lenders will assess the viability of the turnaround plan, the company’s history, current market, management capability, and potential return on investment. They will also examine the company’s assets, cash flow projections, and level of stakeholder support for the turnaround.
How does turnaround funding impact a company’s long-term financial structure?
Turnaround funding often significantly changes a company’s financial structure. It may involve debt restructuring, equity dilution, or new investors. While it provides immediate relief, it can also impact future borrowing capacity and ownership dynamics. The aim is to create a sustainable financial foundation for long-term success.
What are the elements of a turnaround plan when seeking funding?
A turnaround plan should include a detailed review of the current situation, clear problems, operational improvement strategies, financial projections to profitability, a timeline for implementation, risk factors, and contingency plans to comfort funders.
