5 Signs Your Business Needs Debt Restructuring
Debt restructuring isn't just for businesses in crisis. Often, the most successful restructures happen when companies spot the signs early and act decisively.
Here are five key indicators that it might be time to consider restructuring your debt.
1. Your Cash Flow Is Tightening
When meeting operational expenses becomes a challenge, you're facing more than just a temporary squeeze. Watch for:
Difficulty with supplier payments
Stretched payment terms
Using working capital facilities for day-to-day expenses
Depleting cash reserves
The real risk here isn't just about immediate cash flow - it's about the gradual problems in your business's financial foundation. Early restructuring can create breathing room before these pressures get worse.
2. Loan Payments Are Getting Harder
Missing or delaying loan payments aren’t just about late fees. It's about watching your future financing options become fewer and fewer. Regular payment challenges often point to an issue between your debt structure and your business's cash flow reality.
This mismatch doesn’t often fix itself. The longer you wait, the fewer options you'll have.
3. You're Relying on Short-term Financing
Short-term financing serves a purpose, but it shouldn't be a permanent feature of your capital structure. If you're regularly using short-term loans to manage ongoing expenses, it's time to look at your broader debt structure.
The cost isn't just financial, it's operational. The constant cycle of short-term financing takes up management time and attention that could be better spent elsewhere.
4. Profit Margins Are Shrinking
Declining margins put pressure on every aspect of your business, including debt servicing capacity. This isn't just about being profitable, it's about keeping the financial flexibility you need for:
Investment in growth
Innovation and development
Market responsiveness
Operational improvements
When margins tighten, restructuring can create the space needed to implement necessary changes.
5. Rising Interest Rates Are Taking Their Toll
In today's environment, interest rate sensitivity matters. Variable rate facilities that made sense in a low-rate environment can become a major problem as rates rise. Watch for:
Growing interest expenses
Reduced covenant headroom
Decreased investment capacity
Limited ability to respond to market opportunities
If these signs sound familiar, now is the time to act. The strongest restructuring positions come from early recognition and proactive management.
Contact our team for a confidential review of your debt structure - and how we can help, or call 1300 310 761