|By: David Gass|
Debt restructuring refers to the reallocation of resources or change in the terms of loan extension to enable the debtor to pay back the loan to the creditor. It is an adjustment made by both the debtor and the creditor to smooth out temporary difficulties in the way of loan repayment. It can be categorized into two types, and there are many ways to carry out the restructuring process.
How to Plan
1. The creditor company should prepare a roadmap for the process. The strategy should include the expected time necessary to recover the debts, the terms of loan repayment, and watching the financial performance of the debtor.
2. The decision of the financial institution regarding it depends on whether the debtor has invested in the company, holds shares with the company, or is a subsidiary of the company.
3. If there is conflict within the company's board of directors regarding the process, then it is advisable to ask for help from a third party. However, third party mediation should not be necessary if the debtor is a subsidiary of the company.
4) Making a cash flow projection is also important to the process. It is advisable not to include uncertain cash flow estimates in the plan.
5) The debtor's financial situation should also be considered, when making a plan. The debtor's ability to repay the loan depends on the financial management, so the financial company needs to look into the debtor's roadmap for repaying loans. If the debtor is another company, then changing the key people associated with it, like the director, board of directors or chairperson might help.
|Debt, Loans & Business Cashflow|