American Corporate Turnaround: The Emotional Side of Corporate Debt Restructuring...

American Corporate Turnaround: The Emotional Side of Corporate Debt Restructuring...: Image via monitoringsoftwareblog.com More often than not discussions of corporate debt restructuring fixate entirely on the measurable...

The Emotional Side of Corporate Debt Restructuring

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More often than not discussions of corporate debt restructuring fixate entirely on the measurable, concrete benefits gained from the process. Corporate debt restructuring will make your payments fixed and significantly more manageable. Corporate debt restructuring will improve your organization’s cash flow and allow it to expand its operations and grow to the next level within its industry. Corporate debt restructuring will eliminate the fees and charges choking your profits while improving relations with your lenders, suppliers and contractors. But the emotional benefits derived from pursuing corporate debt restructuring are arguably even more important.

Business is, at its heart, about relationships. The relationships between co-workers, the relationships between lenders and business owners, and the relationships between business owners and their company. All of these relationships are damaged when a business is loaded with more debt than it can handle. Coworkers are constantly under pressure because they believe the only way to escape their company’s financial woes is by working harder and harder and harder. The relationship between business owners and suppliers, lenders and contractors is stretched to the breaking point. After all, a loan or services rendered without upfront payment are provided on account of trust between everyone involved. Finally, a business owner stands no chance of enjoying their company and expressing their love and passion for their organization when they are saddled with a crushing debt load.

All of these relationships are healed and mended during a corporate debt restructuring. While increased cash flow is important, so is restoring the trust, love, passion, and feelings of self-worth that find themselves lost when debt becomes a monumental problem.

Solving the Collections Problem

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The very concept of extending credit to another is fraught with a number of problems. At a very basic level, every single time you extend credit to an individual or an organization you are taking a significant gamble. As much as credit card companies issuing plastic, banks giving our mortgages and suppliers taking net-90 terms may like to think they’ve figured out how to tell a potential problem client from a “sure thing,” it’s ultimately impossible to know who will make their monthly payments and who won’t. Even seemingly high quality, highly reliable clients will miss a payment here or there, and even the most affluent of clients can allow their loans to drop into delinquency.

Instead of obsessing over developing formulas that will help you find a truly “risk-free” client, it’s wiser to simply factor risk into you projections. Instead of attempting to only work with clients who you believe will never default on a loan, it’s better to create systems for collecting debts once they’ve fallen into delinquency.

The majority of companies would rather not collect their own delinquent debts. Not only is debt collection still considered a somewhat distasteful act, fixation on debt collection forces an organization to divert attention and resources away from what should be their primary focus; the day-to-day running of their business. Most companies will benefit from working with a qualified and experienced debt collection agency, especially if the debt they are looking to collect is business debt. Doing so will allow that organization to focus on what matters most, and to benefit from the expertise of a professional collection organization.

Look Elsewhere for a Magic Bullet Cure for Debt

Corporate debt restructuring almost always has an immediate positive effect on the organizations that pursue it. Companies that restructure their debt tend to improve their cashflow, restore their relationship with their lenders and suppliers, and fix their debt problems in private. Yet as positive as it generally is, corporate debt restructuring is NOT a “magic bullet cure” for your company’s debt problems. Instead it should be seen as a “better option” than more drastic measures.

If your company suffers under a large debt load then you’ve probably considered declaring bankruptcy. While bluntly effective in removing a debt burden, declaring bankruptcy is not a viable option for the survival of your business and for your ability to create another business in the future. Debt removed during a bankruptcy doesn’t simply “go away.” Sure, under the terms of most bankruptcies you won’t need to pay another dollar on those debts, but the fact you and your company defaulted on those loans will become a matter of public record. Bankruptcy will all but kill your company’s ability to be seen as an eligible borrower in the future and it will create similar damage on your personal lending profile. The specter of your debt will linger in highly unfavorable ways, for a very long period of time, after you’ve successfully declared bankruptcy.

Corporate debt restructuring, by contrast, is a private matter negotiated between you and your suppliers, your contractors, and your general lenders. While these lenders would naturally prefer you stuck to your existing repayment plan, they would rather renegotiate your terms then risk losing your loan entirely through bankruptcy. So even though corporate debt restructuring isn’t a “magic bullet” cure for debt problems, it is superior to many other resolutions for both you and the organizations you owe.

Can Corporate Debt Restructuring Help My Company?

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Let’s make one thing clear- corporate debt restructuring is NOT a magic-bullet cure for your organization’s financial problems. If your organization continues to take on more debt they can handle, if your company is unable to use their restructuring as a means of reaching profitability, and if your company approaches restructuring as a “get out of jail free card” then you will eventually run into the same problems you’re experiencing right now. That being said, for the majority of organizations corporate debt restructuring can be an intelligent step to take, one which will relieve the pressure of their debt load and provide them with the means of reaching sustainable profitability.

There are many ways in which debt restructuring can help your company, but an intelligent restructuring plan will have the greatest positive impact when it comes to improving your organization’s cash flow. There are many, many, many organizations in the world that are technically profitable but who aren’t able to achieve a high enough level of profitable cash flow to expand their operations. These organizations have excellent business models and are generally run in an intelligent manner, but most of their profits go right into debt repayment.

For these organizations, a debt restructuring plan will provide them with lower monthly loan payments, which will in turn provide them with the greater positive cash flow they need to grow and evolve as an organization. Without debt restructuring these organizations would stagnate, they would unnaturally remain in on position, and they would never achieve their corporate potential. With debt restructuring they can achieve a market position that allows them to comfortably pay off their debts in full.