When is the time for a financial restructuring in your company?

Although the new law will not imply an immediate change in the finances of SMEs, it generates the need to improve their administration and financial order, “with a view to cleaning up the accounts and facing expansion processes in the best way”.

The enactment of the 30-day payment law for small and medium-sized companies turned out to be one of the best news of the beginning of the year for the sector, but its effects will undoubtedly constitute an opportunity to organize finances in this type of company.

Although the new law will not imply an immediate change for SMEs, it generates the need to improve their administration and financial order, with a view to cleaning up the accounts and facing expansion processes in the best way..

For this, FR Group Investment, an advisory company in corporate finance and financial restructuring, points out that “it is essential to have guidance and support in managing the obtaining of resources for the company, in order to reconcile the flow of the company with its financing needs, whether they are short, medium or long term “.

The general manager of the firm, Jaime García de la Huerta, considered that there are three scenarios in which every company must analyze a financial restructuring, with a view to making the company viable and ensuring its growth.

When the short-term debt is higher than the Accounts Receivable (CxC) plus inventories. In this scenario, we are possibly facing a financial mismatch, which means that a percentage of capital is being financed in the short term that should be paid in longer terms and with better rates.

When financial expenses show significant increases during two or more periods. If a company uses credit lines or has excessive short-term debt, it is recommended that it evaluate a financial restructuring of its liabilities.

After significant investment in machinery, to seek growth or meet new demand. Given this, the possibility of aligning the financing terms with the useful life of the equipment or machinery should be analyzed. For example, for machinery with a useful life of 10 years, it is recommended that its financing be extended for the same period.

Source: Diario Financiero See more

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