Preparing a business case for a capital and debt restructure

In order to demonstrate that you have too much debt and the wrong capital structure to your stakeholders you will need to prepare and provide some key information.  Read on to find out what you will need, why you need it, and how you can prepare it.

You used to be able to approach your bank manager when you had a financial issue and agree a way forward. However, as businesses have become more complex and have more stakeholders involved, they will expect you to have prepared certain information and have thought through potential solutions before you approach them for help. 

What will you need?

As a minimum you will be expected to have prepared the following:

  • Up to date management accounts – to show your current financial position and performance.
  • Commentary on how the business is performing – in particular the ability to answer three key questions about the pandemic:
    • i) How has Covid-19 affected your business?
    • ii) What have you done to mitigate or take advantage of this?
    • iii) What does this mean for the future?
  • Some medium-term forecasts that show what you can afford to pay back and when. This should include a profit and loss, balance sheet, and cashflow forecast.
  • Shorter term cashflow forecasts that show how long it is before you need some help.

Why do you need it?

Without this information it is challenging, at best, to explain to any stakeholder what support you need from them, why they ought to support you and how long that support needs to last.

How do you go about preparing the information?

We do not underestimate how difficult it is for anyone to prepare this information, no matter the size your business, or your finance function. In particular, forecasting in current circumstances is very challenging. We regularly have to review models and financial information, and so below are our recommendations:

  • Provide explanations for results – don’t simply give people figures with no narrative, try and put some colour on the picture and reasons for the performance.
  • Be clear and concise in how you have been affected by Covid-19.
  • Use an existing system, or off the shelf package, to forecast so that you are less likely to have errors or speak to our specialist financial modelling team. If you are not sure where to start then contact your accountant (or local RSM office).
  • Make sure any key assumptions that you make are clear, linked to either previous performance or explained, and importantly capable of being amended easily.
  • Ensure your funding requirement is clear and easily identified.

If you need some help with any of the above, please do not hesitate to get in touch with Gareth or Damian