Each of the stakeholders in your business (no matter how big or small) will expect you to have considered some intermediate steps before you approach them for help.
Your financial stakeholders will generally be keen to support their customers in troubled times, but they are also keen to make sure that others ‘share in the pain’ before they are approached for additional funding.
Whilst there is no hierarchy on who to approach first, or what order to do it in, there is an expectation that you will independently have requested support from individual stakeholders before asking for a more global solution, or debt and capital restructure.
In no particular order we set out below some of the key options you must consider before any overall restructure:
- Government initiatives – recent grants, supported loans, Job Retention Schemes should, wherever possible, either have already been used or been applied for.
- HMRC deferral and Time To Pay (TTP) - taking advantage of the support offered by HMRC regarding deferral of liabilities, and arranging TTP agreements is very often on the checklist.
- Sale of subsidiaries, assets or stock no longer in use.
- Stretching of trade creditors – no stakeholder is completely immune, so even those key trade creditors and suppliers should have at least been approached for additional credit.
- Shareholders and private equity – discussions must have been held with shareholders, owners or existing private equity providers about providing additional equity.
- Banks and asset-based lenders– can additional facilities or headroom be made available on commercial terms, or even on a temporary basis to provide more time, or would another funder be able to provide additional finance?
- Trade debtors – potentially offering discounts for earlier payment.
These are not necessarily easy discussions to have. It may be that you need some support in both preparing for, and having them. Early engagement with your local RSM Restructuring Advisory team will allow us to support you in those discussions and increase the likelihood of individual success.
However, if the support that is available unilaterally from some of the above actions is not going to be sufficient to solve the problem, then a more combined or collective solution is going to be required – a capital and debt restructure.