You are a company director or top executive: 5 signs of approaching difficulties.

What are the 5 signs which should alert any company director or top executive as to the difficulties confronting his or her company and the solutions which may be available?

1 – The company is tending to extend its trade credit.

The company becomes a structural late payer (an old invoice is only paid when a new invoice arrives) and suffers a deterioration of its insurance credit ratings and of the Bank of France’s credit scoring.

2 – The company becomes subject to the registration by creditors, with the commercial court, of pledges or guarantees for their debt claims.

3 – The person responsible for the company becomes anxious as to the company’s ability to repay its loan finance:

  • Significant maturities will crystallise over the coming twelve months but the company is not sure that it will be able to honour them;
  • The company has accepted certain loan covenants allowing the lending banks to require the early repayment of long or medium-term loans. The company was in breach of certain covenants at the last applicable date of calculation or runs the risk of breaching them during the course of the following 12 months.

4 – The company’s banking relationships are deteriorating:

  • Overdraft facilities are used up to their limits;
  • Overdraft facilities have been progressively reducing over the last 18 months;
  • The company has received a letter from its bank(s) requesting the repayment of its short-term facilities.

5 – Key company employees are resigning.

The solutions available in the event of a liquidity crisis

It is preferable to prevent than to have to cure; if the signs described above are detected, the company is approaching a liquidity crisis.

If you are the director or a key executive of a company experiencing cash difficulties, SO-MG Partners can help you define, in all tranquillity, a rapid and lasting solution. The main phases of our support are described hereafter:

1 – Stabilise the company’s financial position in the very short term with the help of day-to-day operating support:

  • Analyse the company’s cash position at a recent date and for the few preceding weeks, with the focus on liabilities and financing resources;
  • Identify the quick wins and scope for delayed or frozen payments providing immediate cash benefits at minimum risk;
  • Plan and perform cash trade-offs designed to secure the payment of salaries and maintain working capital.

2 – Perform, in the medium term, an independent diagnosis of the situation based on reliable technical data and enabling determination of the company’s medium-term cash requirements and potential.

3 – Present the company’s cash requirements to its current business partners and seek out solutions to finance them.

If necessary, seek out external partners or alternative sources of financing for the requirements identified, with the help of direct access to the main market players: banks, public institutions, legal advisors etc.

4 – In the longer term, clarify the strategy of the company’s management and shareholders with the aim of optimising the company’s enterprise value in the context of a secure legal environment.

Overview of our support:

  • Independent and rapid diagnosis using reliable techniques;
  • Identification of cash requirements and development of a tailored action plan;
  • Support for management in implementing the solutions and drivers of improvement identified.