Posts

REFINANCING – COVERING YOUR ASS..ETS

/in ,

After suffering through some harsh financial times in recent years, when we hear phrases such as cash flow boosting, restructuring and refinancing one of two feelings may occur to us. We either are stricken with more fear than that which occurs on Sunday evenings as we imagine all that we have built into our company walking out the door on us (“anything but the beanbags please, they are our only link to trendiness!), or the clouds part and we may think we hear the angelic chorus of our financial salvation.

 

The refinancing of assets sounds like a dangerous road to go down, and can inspire more than a bit of hesitancy when the idea is brought up, but restructuring and refinancing of your assets may be the one thing standing between your business and the ultimate success of overcoming financial obstacles. In recent years it has been found that this unlikely alternative can ultimately help businesses in financial difficulty, in particular SME’s to survive through tough times.

 

The refinancing of assets involves financing assets you already own in order to unlock some much needed cash flow over a period of time. The money borrowed in this way is secured against the value of the existing assets. The cash tied up in these assets is then released in order to allow these funds to be utilised in other ways. This may involve the restructuring of existing loans and the setting out of a new repayment schedule, perhaps extending the period of an existing loan. Refinancing can be an excellent way of unlocking cash from assets you already own such as company cars or general machinery and equipment.

 

Many SME owners may not be aware that this is a viable option for their business to boost cash flow and engage in new opportunities. Whilst refinancing at the present moment may be primarily geared towards the SME market, it isn’t just an option for SME’s. The refinancing of assets is also suitable for larger companies who already have strong assets, as this can generate some extra funds that may ease any financial pressure.

 

Of course, refinancing does come with its own set of risks and you must seriously consider your repayment options and capabilities before engaging in this activity to ensure that you do not set your business up for further complications down the line. Once you confirm your repayment abilities and set out a plan you are comfortable with, this can be an easy way of freeing up cash within your business at a time when it might be most needed, allowing you to invest further in important projects or perhaps even take on new and exciting opportunities.

 

If you are interested in refinancing some existing assets within your own company, or just curious as to how you would go about this give us a call here at DCA Accountants and we would be glad to talk you through your options.

‘EXAMINERSHIP LIGHT’

/in ,

Recent legislation allows smaller firms to seek Examinership in the Circuit Court, making it easier and more cost-effective for SMEs to restructure.

The Government doesn’t often give struggling small businesses a Christmas president, but new legislation signed by Michael D Higgins on Christmas Eve will come as a boon to many. After a lot of pressure from lobby groups, the Companies (Miscellaneous Provisions) Bill sets out a framework for a kind of ‘examinership light’, giving firms access to court protection from creditors without forcing them to go through the expensive High Court process.

 

What it Means

For many companies, Examinership provides the best way to negotiate with creditors, review contracts and devise a rescue plan that keeps the business running as a growing concern. Historically, however, the procedure has come with the rather large downside of legal fees: it is extremely difficult to go through a High Court Examinership for less than five figures, and processing a complicated case can end up costing nearly €1m. For a business that is already struggling, such a large cost will often make a bad situation irretrievable.

Moving the venue for smaller firms seeking Examinership to the circuit court has an instant impact: for one, the Government estimates that legal fees are at least 30% lower in the lower court. The change in venues will also lead to less pressure on the overworked high-court system, and hopefully lead to speedier processing times for both large and smaller cases.

 

Eligibility

There are, of course, certain conditions attached to the rules: a large firm can’t avail of the cheaper Examinership process. To be eligible for Circuit Court Examinership, a company needs to meet two of three conditions. These are a balance sheet of €4.4m or less, a turnover of €8.8m or less, and a workforce of 50 or under. These broad and flexible criteria should allow most struggling small businesses to seek court protection rather than proceeding straight to insolvency.

 

Other Benefits

Another provision of the bill will make a smaller impact, but should benefit just about every company. Under previous legislation, when filing accounts at the Companies Registration Office, both a director and the company secretary must sign a statement to verify that the accounts are a true copy. However, the new legislation allows type signed accounts to be electronically filed using the online CORE system. It’s not a huge cut in the volume of red tape faced by businesses, but every little helps!

Here at DCA, we have been advising our clients about the impact of the bill on their day-to-day business. We also help companies facing difficulties to determine their best course forward, whether this is through restructuring or insolvency. To set up an initial, no-obligation meeting to discuss your situation and your options, simply contact us.

 

Do you have a question for DCA’s experts? Contact us or connect with us on Twitter.