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You’d be hard pressed to find a business which didn’t take on significant debt to either form or to grow during a critical stage of its development. Many of those businesses will eventually find themselves unable to pay off these loans according to their original terms and find themselves needing to restructure their business debt in order to stay solvent and to produce a business plan which will allow for future profitability. While reducing your operating costs in order to lower overhead and generate extra cash to pay off your debts is a valid response to insolvency, there is a secret which allows you to restructure your business debt without freeing up or generating any extra income.
Many companies have been able to negotiate with their creditors to exchange a chunk of their business debt in exchange for equity in their company. Essentially a businesses’ creditors will “buy in” to the company which owes them money, purchasing a stake in their future through the alleviation of already extended credit.
If you are planning on restructuring your business debt through this method you MUST work with experienced and qualified professionals to make sure you don’t accidentally provide your creditors with a controlling share of the business in the process. If you and your professionals craft the proposal intelligently and carefully you will be able to trade debt for equity, restructuring your business debt without losing control over your company and without having to immediately generate addition cash.
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