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.