How to Stay Ahead of Your Debt

Keeping yourself out of debt can be a tricky thing.  It is difficult for many people to even recognize the amount of debt they are in before they realize that they have been overwhelmed with credit card payments, house payments, and car payments.  It is important to stay ahead of your debt as to not become overwhelmed and begin only paying the minimum payments every month.  There are a few things that you can do to ensure that you stay ahead of your debt.

First, keep yourself focused and maintain a solid budget.  There will be times in your life that you will need to determine between wants and needs and it is important to only go with your needs if you do not have the money on hand.  That fancy car or new computer will be there when you are out of debt so make sure to focus on your priorities.  Making sure not to spend money on things you don’t need will help you greatly in staying out of debt.

Another thing that you can do to stay ahead of your debt is to possibly get a second job.  If you run into car troubles and are running low on funds, it is always an option to work another job until you can pay off a good portion of your debt.  While nobody wants to work full time at one job and then take on another job, it will be very beneficial to you and your debt.

Lastly, sell the stuff you don’t need.  If you are driving around with two cars and you have debt piling up, sell a car.  You do not need two.  If you have a bunch of fancy jewelry but you don’t have money to pay for your lights, sell some jewelry.  Sell anything you don’t need and get ahead of your bills. 

Keeping yourself ahead of your debt is a long process but once it is finished, you will have a huge weight off of your shoulders.

What is a Debt for Equity Swap?

 

Certain companies may occasionally need to restructure their financing throughout their business life.  One of the reasons this may happen pertains to wanting to stay within their contractual agreements.  Some lenders require a company to maintain a certain debt to equity ratio.  Other times a company may not want to pay face value payments or make their coupon payments.  An option to avoid such thing is to partake in a debt for equity swap.

A debt for equity swap is just what it sounds like, it’s when companies swap equity for their debt.  This is typically done with only a portion of the outstanding debts.  For this to happen the creditors must agree to the trade.  The price of the swap is dependent on the market rates that are currently going on. 

On some occasions, the decision makers may offer a higher exchange value for their debt.  This is done in order to attract the debt holders to the offer and make the exchange seem more appealing to the creditors. 

Alternatively, some people opt for an equity/debt swap.  This is essentially the opposite of a debt for equity swap.  In an equity for debt swap the shareholders are allowed to exchange their stock for bonds in the company. 

Although there are two options under this category, it is typically the debt for equity option that is used the most.  This is the one that offers financial relief to the business that is in need of restructuring. 

 

What is a debt for equity swap?

Corporate Refinancing- A Step By Step Approach

Restructuring your debt isn’t only used as a debt relief mechanism in a time for trouble.  Occasionally refinancing your debt can help your company out greatly in the long run.  A time when refinancing is a great option is when interest rates decline or if your business is doing very well. 

Here are some steps you can take for corporate refinancing. 

Evaluate

It’s important to plan at least a half of a year in advance for your corporate financing task.  You have to be able to evaluate your company, and not let any personal biasness get in the way.  It’s sometimes best to have a third party evaluate your company’s credit rating.   It’s beneficial to have these numbers on hand regularly in case the interest rates decline rapidly.  At times interest rates will rise just as quickly as they dropped. 

Preparation

Ensure that you are constantly creating a good credit rating with your creditors.  Some companies have even noted taking out loans that are unnecessary in order to simply build a credit rating.  Accumulating good credit is a must when it comes to getting the opportunity to partake in corporate refinancing. 

Implementation

After you’ve evaluated your company and realized that refinancing would be something beneficial to you, it is time to begin the refinancing process.  By building relationships with financing companies you will have a wide variety of options open up for you.  It’s important to pick the right restructuring option.  As we’ve talked about, you can issue equity in relief of some of your outstanding debts.  Another thing you could do would be to renegotiate the current terms of your debt with your creditors.  This will require both parties agreement.

Corporate restructuring doesn’t have to always be associated with negative feelings.  Occasionally the refinancing is done because of a positive increase in the company’s profits and credit rating. 

What is the best way to prepare for corporate refinancing?

When is it Time for Corporate Debt Restructuring?

Financial hardships are never something that a business owner wants to think about, however sometimes even the most well thought out businesses have to face them.  When these hardships arise, and the inability to meet your obligations becomes prominent, corporate debt restructuring may be a valid option. 

Corporate debt restructuring consists of making an effort to reduce the financial burdens that a company holds.  The basic way of doing this is by allowing for the company to have more time to pay their obligations and by reducing the interest rate that is being paid.  On occasion allowing your creditors to have equity in your company may reduce the principle sum of the debt.  It’s times like these that negotiating with your creditors is very important in order to avoid having to file for bankruptcy. 

An important thing to remember about corporate debt restructuring is that it’s important to not let yourself slip too far before you opt for a restructuring plan.  These plans, if enacted correctly, should bring s speedy relief to the financial situation of your company. 

It’s also imperative to keep in mind that the need to restructure your debts does not indicate a failure of any sorts.  Having to restructure should not be embarrassing for you or your company, it should actually be viewed in an opposite light.  Past experiences have shown that corporate debt restructuring, if done properly, can reflect positively as responsible and knowledgeable management.  Both internal and external recipients view it positively. 

Corporate debt restructuring is not a last case scenario.  It should be at the forefront of your mind when you first notice your financial struggles.