5 Ways Post-Commencement Finance Can Affect Business Restructuring Plans

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When a company undergoes business rescue, it goes through a transformation to get back on its feet. The operations, finances, and structure are realigned to make the business viable again. This involves taking a fresh look at expenses, contracts, assets, and more to shape a sturdier business model.

Post-commencement finance (PCF) is crucial in this context, as it influences the overall restructuring strategy. Adequate funding can facilitate essential changes and provide a buffer, ensuring that the restructuring plan can be executed effectively. Its availability can enhance creditor confidence and support the long-term success of the restructuring effort.

Let’s take a closer look at how post-commencement finance plays a role in shaping business restructuring plans.

Understanding Post-Commencement Finance

Post-commencement finance offers struggling companies a lifeline mid-restructuring. This type of lending is specifically structured for businesses in such circumstances, rather than relying on pre-distress financial health. PCF offers a lifeline, providing funds to maintain operations as the company works on its turnaround strategy.

5 ways post-commencement finance can affect business restructuring plans

1. Improved Cash Flow

As companies navigate restructuring, they often face cash flow shortages triggered by reduced revenue, rising operational costs, and the need to meet existing debt commitments. PCF supplies the liquidity needed for managing operational expenses, compensating employees, and maintaining crucial services. This infusion of funds can help avert further decline and foster a more stable environment for restructuring efforts.

2. Enhanced Negotiating Power

Post-commencement financing puts companies in a stronger position with creditors. The promise of new money opens doors in debt negotiations. Businesses can ask for extended repayment periods or discounted interest rates. Creditors see a financially healthy company and gain confidence in management's plans. 

With PCF, companies don't have to take the first lowball offer. They have bargaining power to get a fair shake from creditors. This makes debt restructuring discussions more productive for both sides.

3. Encouraging Stakeholder Confidence

Post-commencement financing gives stakeholders like employees, suppliers, and investors the confidence to stand by a restructuring company. This stakeholder reassurance is vital because it means employees keep showing up, vendors keep supplying, and investors keep holding their shares. It prevents mass departures, delivery stoppages, and panic selling. 

Instead, stakeholders believe in the company's future and offer their continued support. Post-commencement financing provides tangible proof that management has a viable restructuring plan. And that proof of viability goes a long way during the tumultuous business rescue process.

4. Flexibility in Restructuring Plans

Access to new capital unlocks the ability to explore strategic initiatives specific to their situation, be it investing in increased productivity, shedding non-essential assets, entering new markets, or acquiring innovations to gain a competitive edge. The customised restructuring roadmap financed through post-commencement opens up routes to stabilisation and growth previously obstructed by a lack of funds.

5. Building a Solid Foundation for Future Growth

Emerging from insolvency doesn't have to mean the end for a business. Post-commencement financing provides the means to regroup, rebuild, and restart stronger than before. The funding allows leadership to implement a thoughtful reorganisation strategy. 

Companies can use the process to bolster decision-making capabilities and shore up risk management. With the resources to execute a smart turnaround plan, businesses can recover from insolvency more competitively and resiliently, primed for future expansion.

Final Word

When distressed companies secure post-commencement finance, it marks a turning point in their efforts to bounce back. PCF lets them shift gears, bring stakeholders back on board, and work through complicated restructuring. The combination of urgent funding and long-term strategy lays the groundwork for businesses to get creative and chart a new course.

Speak with the team at Geddes Capital to explore tailored post-commencement finance solutions designed to support your business through this critical stage.


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