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Refinancing and debt restructuring

Most businesses that feel short of cash are not short of revenue. They are carrying a payment schedule built one facility at a time, each one sensible on its own, and collectively wrong.

Typical size
Matched to the existing debt, commonly $100,000 to $5,000,000
Typical time
Four to ten weeks, faster where the replacement is non bank.
Security
Depends on the replacement facility. Existing registrations have to be discharged or postponed.

When it fits.

  • Two or more high cost advances taking a daily or weekly remittance.
  • A term facility maturing without a plan.
  • Debt that was appropriate for the business three years ago and is not now.
  • A payment schedule that leaves nothing after debt service.

When it does not.

  • Refinancing to release cash the business will spend on the same problem again.
  • A file where the arrears are with the CRA and there is no payment arrangement. That has to be settled first.
  • Any case where the numbers say the answer is a restructuring conversation rather than a new facility. We will tell you that early.

The detail, if you want it.

Open only what applies to you. Nothing here is required reading before a first call.

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How it actually works

The first job is the numbers, not shopping. We build the full schedule: every facility, its rate, its remittance frequency, its remaining term, its security, its prepayment penalty, and what it actually costs per year. Owners are regularly surprised by the total, particularly where daily or weekly remittances are involved, because those do not appear as an obvious monthly number anywhere.

Then we look at what can be replaced and at what order the registrations sit in. A refinance is only executable if the incumbent lenders can be discharged or postponed, and that is a negotiation, not a form.

The measure of success is not the headline rate. It is free cash flow after debt service, and whether the business can survive a soft quarter.

What a lender will ask for5
  • A statement for every existing facility, showing balance, rate, remittance and payout
  • The PPSA registration summary for the corporation
  • Two years of financial statements and the current interim
  • Six months of business bank statements
  • CRA account balances and any payment arrangement in place
And what they will ask you4
  • What is the total annual cost of the existing debt, in dollars?
  • Why was each facility taken, and what changed?
  • What is free cash flow after the proposed new schedule?
  • Who is registered, in what order, and will they discharge?
Questions we get about this one3
Can I refinance out of merchant advances?
Sometimes, and it depends on how many, how recent, and what the deposits will support. Two is difficult. Three or more usually means the answer is an operating fix before a financing one.
What are the prepayment penalties likely to be?
On fixed rate bank debt, an interest rate differential that can be substantial. On advances, an agreed payoff that often removes little of the total cost. We work out the real cost of leaving before recommending anything.
Will refinancing hurt my credit?
The application activity is visible. The larger risk to a credit profile is continuing to service a schedule the business cannot carry.
Read about this3

Is refinancing the right instrument for your deal?

Tell us the amount and the timing, and we will say which instrument we would reach for.

No lender hears your name until you say so.

A request emailed to twenty lenders leaves twenty records. The next one to see it reads the declines before they read the deal, and a file that looks shopped is priced as one. So the list is built with you, approved by you in writing, and nothing leaves this office before that.

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Hours
Weekdays, Toronto time