Financial Workouts

Financial Workouts

Financial Workouts differ from Debt Negotiation because they are done for businesses while Debt Negotiation is a service provided to individual consumers. It’s an important distinction. You don’t ever want to access the wrong technique to solve a problem you have.

A Financial Workout is actually a proposed repayment agreement given to creditors.  Your firm needs to show that it is able to generate sufficient cash flow from future operations to sustain its operations and pay back its creditors.

Creditors can also be paid back in other ways – through new equity investments in your company or as a result of new debt financing.  However, it may be difficult to attract investors when your company is struggling and in debt although there are likely to be some financial institutions willing to lend money to your company at very high interest rates.  Obviously, that may not be the smartest way to pay down debt.

If you’re the owner of a small, but financially distressed business you will need to do a number of things before you meet with your creditors. For one, you’ll have to create a Reorganization Plan that shows how your business will sustain itself on a cash flow basis going into the future.  That means you will need to prepare forecasted financial statements for three to five years. These statements will have to show how your company will generate cash flow that will enable it to pay off creditors.

This kind of work is normally done by a business bankruptcy attorney, Certified Financial Planner or a Certified Public Accountant. Keep in mind that there is no set or established format for producing a Financial Workout. It can include any provisions that are important to your business or to your creditors.

Contact Davidoff & Associates for help with this service. We’ll prepare the forecasts for you and we’ll negotiate directly with your bank or other creditors to get you the very best and most favorable terms for repayment of your debt.