Ways to Refinance
Monday, March 9, 2009 7:03
One thing the recession has achieve so far is narrow the gap between struggling companies and healthy ones.
With questions looming over the availability of finance, in order to repair the balance sheet, which was weighed down by debt, companies in the process of restructuring or shoring up a shortfall in working capital are looking at alternatives to traditional cash sources.
However, in the prevailing climate, there were no guarantees that the rights issue would succeed. Banks really don’t want to talk about lending money at the moment. Businesses that might once have looked to their banks to provide or renew the credit lines that would see them through a sticky patch are now finding there is much less cash to go round. The withdrawal of overseas funding puts even more pressure on domestic lenders. As a result, the traditonal relationship between banks and companies has broken down.
Though bank finance is not impossible, it is extremely hard. Companies struggling to refinance should try some new ways to raise money. For example, some businesses are raising money from the bond market, while some others are seeking opportunitis to raise mezzanine finance. You can borrow against stock, machinery or even IP. And you can even look for rescue cash and take advantage of the new rules that allow delayed tax payments.
However, there is a price to be paid. Whatever the funding solution, in the current crisis, it is likely to be eye-wateringly expensive for businesses that have grown accustomed to easy and cheap credit.
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