Debt restructuring is a process used by companies to avoid the risk of defaulting on their existing debts. It is the process of renegotiating the terms of existing debt obligations to make them more manageable, often involving reducing interest rates, extending repayment periods, or lowering the principal amount owed.
Debt restructuring provides a less expensive alternative to bankruptcy when a debtor is in financial turmoil.
A well structured deal can work to the benefit of both borrower and lender.
Using our financing solutions, you can pay off all your lenders and refinance all your loans into one.
This can result in reduced payments of 25% or more. Your cash flow and bottom line can be greatly improved.
EXAMPLE OF A RESTRUCTURING
A company has multiple Merchant Cash Advances. The costs to service those contracts are strangling the company. A restructure of these contracts can reduce the amount due by 25% or more, adjust the terms and payments to an affordable level.
Many companies can benefit by doing something similar.
Contact us and let us help you.
Here’s a more detailed explanation
Purpose:
Debt restructuring is a strategy used by individuals or businesses facing financial difficulties to avoid defaulting on their debts or filing for bankruptcy.
How it works:
The debtor (individual or company) contacts their creditors (lenders) to discuss their financial situation and propose changes to the existing debt terms.
Potential changes include:
Reduced interest rates: Lowering the interest rate can significantly reduce the overall cost of borrowing.
Extended repayment terms: Lengthening the loan term allows for smaller monthly payments.
Lowered principal amount: In some cases, the principal amount owed can be reduced, making the debt easier to repay.
Debt-for-equity swap: In a corporate context, creditors may agree to accept a share of the company’s ownership (equity) in exchange for a portion of the debt being forgiven.
Benefits:
Avoids default: Restructuring can prevent a borrower from defaulting on their debt obligations, which can lead to negative consequences like credit damage and legal action.
Reduces financial strain: By making debt payments more manageable, restructuring can alleviate financial stress and allow the borrower to focus on improving their financial situation.
Allows for business recovery: For businesses, restructuring can provide the breathing room needed to stabilize operations and potentially turn around a struggling company.
Considerations:
Negotiation is key: The success of debt restructuring depends on the borrower’s ability to negotiate favorable terms with their creditors.
Professional advice: Seeking professional help from financial advisors or debt restructuring specialists can be beneficial in navigating the process and securing the best possible outcome.
Potential impact on credit: While restructuring can help avoid default, it can still have a negative impact on a borrower’s credit score, depending on the specific terms of the restructuring agreement