How Will The Lockdown Impact The Business?
COVID-19 (Coronavirus) is having an unprecedented and devastating impact on businesses. Travel restrictions, disrupted supply chains, subdued demand and labour issues have unsettled the businesses resulting in:
- Lower demand and thus lower top-lines
- Default and renegotiations of contracts
- Delay in receivable liquidation
- Cost escalations
- Decline in profit margins
- Reduced credit terms from suppliers
How Would This Impact The Repayment Of The Loan?
The above will lead to cashflow mismatches and thus cause a difficulty in meeting current debt obligation. The issues would be magnified in companies where:
- The loan moratorium period has ended or is about to end
- The operations post-expansion have not yet stabilised hence cant service the debt immediately
- The cash flow mismatch due to tenure of loan being shorter than project lifecycle, especially in infrastructure project companies
- Education Institutions facing cashflow mismatches due to shorter tenor of loans
- Larger EMIs being difficult to service due to reduced scale of operations in short term due to COVID-19
- Companies with a relatively higher cost of borrowing
How Should One Tackle The Situation?
A proper financial plan is a prerequisite in this time of crisis. A comprehensive cashflow estimate has to be prepared and analyzed to determine the expected shortfalls and a thorough plan needs to be prepared to address the shortfall determined.
How Can InCorp Help You?
We have formed a specific team of expert advisors who would devise a custom plan for your business after studying the specific challenges facing your business. We would assist you in restructuring / refinancing the debt to addresses the issues above. The refinance of limits would ease cashflow pressures by:
- Deferment of the principal repayments by extending the moratorium period of the loan
- Increased tenor of the loan to match project cashflow timelines
- Additional Short Term / Long term corporate loans to tide over shortfall in funds
- Structured repayment schedule to match project cashflows
- Reduced rate of interest
- Optimised loan structure