How Alternative Financing Can Help Distressed Companies Turnaround and Prevent Bankruptcy
Companies in financial trouble need to seek small business lenders and financial services firms that specialize in providing advisory to clients in distressed situations, especially as small business lending remains tight.
One of our main strengths at US Capital Partners is our ability to finance businesses as well as provide financial advisory in complex and difficult situations. We have extensive experience in restructuring corporate debt and we've rescued multiple businesses from the brink of bankruptcy.
Below I've outlined a few common problems that distressed businesses are often faced with while briefly outlining how alternative financing can help turnaround distressed companies to prevent bankruptcy.
DEALING WITH AN UNCOOPERATIVE LENDER AND/OR KEY VENDOR
We recently worked with a national distributor of consumer products who was facing bankruptcy due to the uncooperative nature of their lender and key vendor. Our client was only in technical default – and because the vendor did not want to continue the relationship, this was used as a lever to force them out of business. Due to legacy issues, the vendor didn’t want to deal with our client and would not cooperate with a workout strategy. However, instead of letting them go bankrupt, we brokered a deal where the key supplier bought out our clients assets, which prevented them from a personal bankruptcy of $40 million. This was an extremely dire situation that was met with the least worst outcome.
FACING LIQUIDATION IN CHAPTER 11
Sometimes a bank’s problem can become your problem, especially when an institution goes out of business. Depending on what a bank wants to do – whether it will be cooperative or play hardball – it can force you into Chapter 11 to liquidate assets.
We worked with a company whose national marquee lender went out of business. This forced our client into potential bankruptcy for some technical covenant breaches, which under normal circumstances the lender would have modified. Instead, this was used as a means to force the business into bankruptcy liquidation – because the bank had its own agenda to liquidate assets. Instead, we put together a workout group in order to monetize the client’s portfolio. We also provided term sheets and commitment letters to the court with refinancing details. This helped delay the bank’s rush of forced sale of assets so we were able to complete the refinancing and prevent the bankruptcy.
OVERCOMING REDUCTION OF WORKING CAPITAL
A company can also be put out of business if it’s in a situation where it no longer has working capital to run on. We’ve worked with clients to re-structure their debt and change their product mix from a lender, including putting together alternative financing deals that are often necessary in this climate. This can help put a business on an altogether new financial footing, allowing it to secure additional or recapitalization funding, as necessary.
In these cases, the situation may not seem immediately dire, but if a business isn’t proactive about protecting it’s financing, this could have catastrophic results.
At US Capital Partners, we have considerable expertise in financial reorganizations, financial analysis, cash flow management and projections, sales cycle analysis, business strategy execution, financial and business modeling, creditor negotiations, and merger and acquisition funding. At US Capital, restructuring clients enjoy all the benefits of a full-service investment bank.
Since 1998, US Capital Partners has been providing prompt, innovative, and reliable financing solutions including lending, corporate financing, and debt re-structuring to businesses across the United States and abroad. If you are looking for financial support, visit US Capital Partners, Inc. athttp://www.uscapitalpartners.net/ or call (415) 882-7160.