Corporate Debt Consolidation

Getting your business debt under control

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Introduction

At different times in the business life cycle a corporation may find itself in a financial need for additional

cash flow. This can happen due to a downturn, an unexpected failure of a major account, bad cash flow, or

a bad management decision. Sometimes it can even be due to issues that a company or corporation has no

control of. The option of using corporate debt consolidation is available as a tool, but there are caveats and

hazards involved. The benefits can be maintained financial relationships and liquidity during a hard time to

be later resolved completely when revenues are flowing again. However, corporate debt consolidation is

only a temporary fix at best, and a corporation will ultimately have to pull itself out of its debt hole to be

successful again.

What is Corporate Debt Consolidation?

Similar to the more familiar consumer debt consolidation, corporate debt consolidation is a financial tool

available to businesses to make their debt profile more manageable. Prior to getting to the point of a debt

consolidation, most businesses and corporations have other tools they can use such as bringing in more

investors, increasing sales, taking out new loans, etc. However, when those options begin to get limited

corporations begin to look at their debt portfolio to determine if it can be restructured.

The re-managing of the debt, particularly from multiple debts into one large one, is debt consolidation.

Corporate debt consolidation specializes on the needs and loan size amounts typical of businesses, which

generally tend to involve monies much larger than a traditional consumer loan. Additionally, the historical

collaterals used by consumers are not always available in corporate financing. Thus corporate debt

consolidation has to be hinged to entirely business-oriented collateral such as accounts receivable,

ownership, equity, capital property, and other business aspects.

What Puts a Company in a Situation that Needs Consolidation?

Corporate debt, particularly those finances owed but not paid or falling late is bad for everyone involved.

The corporate management, the lender, the corporate investors, and the stakeholders are all negatively

affected. There are no winners in letting a company collapse under debt. As a result, when things go bad

financially, many corporations look to restructuring first before ever thinking about throwing in the towel with

bankruptcy. The three common categories of need that raise the possibility of consolidation tend to be crisis

management, raising cash flow, and restructuring the organization. These categories are not exclusive;

many corporate financial decisions can be driven by two issues simultaneously or all three.