Online business loans -Application process for small business borrowing
The simple & secure application process for small business borrowing
It is necessary for this not to rush and make a realistic initial diagnosis to know the real nature of the difficulties. Are these difficulties really cyclical and quite exceptional, or are the difficulties encountered the translation of a deeper profitability problem for example? This diagnosis will enable the development of a financial and operational recovery plan, which will reveal a need for financing.
Depending on this diagnosis and the overall need for financing, the company in difficulty will seek to gather the necessary amount by combining several means. It should be remembered, however, that the search for financing for a company in difficulty is very difficult.
Refinancing of business by exploiting the assets of the companyS
Optimize Working Capital Requirement (WCR):
The optimization of the BFR is a lever too often underestimated. This requires combining:
- better recovery of the sums possibly due to the company, especially among its customers. Attention, the request for advance or faster payments to some customers should be considered with caution because of the risk of concern that could harm the goodwill,
- Lengthen – moderately – the payment terms of some creditors,
- Negotiate – where appropriate through CCSF  ;
Divest non-strategic assets
Divest – if there are any – non-strategic assets that can be divested by being particularly attentive to the conditions of sale that must be documented, reasoned and at market price to avoid any questioning of the directors’ liability (risks related at the “suspect period”),
Put in place – where possible – asset financing:
- Factoring or other mobilization of receivables,
- Sale and leaseback on machines or buildings.
These three types of actions should help reduce the need for financing for a company in difficulty. It is the responsibility of the manager to seek additional financing in the form of a supplementary loan, a capital increase with shareholders or refinancing of significant financial maturity
Get a loan for a troubled business
There are cases in which a bank’s refusal to grant financing to a company in a simple tense situation may make it fail.
In fact, even in the case of temporary difficulties, a bank rarely grants a loan to companies in difficulty. However, in case of refusal of a loan for a company in difficulty, the company can move towards Mediation of the Credit.
In case of refusal of such financing, a new request to the bank can be formulated with the support of the Credit Mediation. Credit Mediation was instituted in November 2008 to address the difficulties faced by businesses in obtaining bank loans. It is open to any entrepreneur, craftsman, trader, liberal profession who encounters an end of non-receipt of his bank, while the company meets:
- cash flow difficulties,
- a lack of own funds.
The origin of this institution is based on a simple idea: do not leave any company alone in the face of cash flow or financing problems.
The company can only go to the mediator after having been refused a bank.
Another type of help for companies in financial difficulty
Funding to solve specific problems
If the company goes through specific problems, those internal solutions have been implemented AND that there is a credible reversal plan, then the manager can turn to:
- its existing shareholders;
- its existing bank creditors to negotiate deadlines (most often, banks will be able to extend deadlines on principle by maintaining interest payments). Beware, such a renegotiation will be extremely difficult to begin without the shareholders arguing in one way or another. This type of negotiation – conducted with the help of an ad hoc agent or a conciliator – will be a very good way of helping companies in temporary cash flow difficulties.
- Finally, the company may seek a contribution of fresh money from investors in turnaround ( revolving fund ).
Financing to solve structural cash difficulties
Structural cash flow difficulties will result in less comfortable solutions for the shareholders of the company meeting them. Indeed, in the absence of the ability to find bank financing, the company can – in order of preference:
- Request the opening of a bankruptcy procedure to freeze its liabilities to clear it – if any – over a maximum of 10 years (which corresponds to “free” financing over the same period but with all the impacts on the goodwill related to a collective proceeding;
- Look for investors to open up its capital largely to third parties, most often turnaround investors who will have the ability to apprehend the situation, build, finance and implement a turnaround plan. But their intervention will take into account the situation and the risks of execution. Under these conditions, their contribution will be made on very low valuation bases and the existing shareholders will be very diluted;
- Without being able to find a solution to address its structural difficulties (inability to finance corrective measures, to convince a court or investors reversal of the existence of a credible reversal plan), the only solution will be to dispose of the business as part of a disposal plan that will crush the liabilities and the shareholders by selling the business to a third party.