Never underestimate the importance of liquidity management. Profitability issues slowly erode a company’s well-being, while a lack of liquidity can deliver the fatal blow to a business. Ernest supports you in promptly finding the right partners to overcome liquidity shortages.
But to prevent cash flow and liquidity shortages, consider these aspects first. Liquidity planning is key: maintain a clear view of cash inflows and outflows in the coming months. Also think of stress testing. Assessing the impact of significant fluctuations in key parameters such as volumes, sales prices and raw material costs prevent liquidity issues. Having back-up solutions such as cash reserves or committed financing lines like revolving credit facilities or straight loans also allow you to handle unexpected events or capitalize on opportunities.
Optimizing your company’s capital structure involves aligning assets and liabilities by financing long-term assets with long-term funding, striking a balance between fixed assets and capital costs. Next, tailor financing instruments to your cash flow generation. Early-stage companies may benefit from equity with longer commitments, while established business can explore debt options from debt funds.
Diversify funding sources beyond traditional bank loans, exploring public capital or debt capital market instruments like private placements, commercial paper and bonds. And ensure assets are fairly valued on the balance sheet to maximize liquidity opportunities and provide reassurance to lenders.
By carefully evaluating these factors, you can establish a capital structure that aligns with your company’s objectives, cash flow dynamics and risk management requirements.
Debt restructuring involves adjusting a company’s funding structure to better match its current situation. This includes considering the duration of funding, with long-term assets ideally financed by long-term funding. Repayment structure should be evaluated based on cash flow generation, while ensuring sufficient security in uncertain scenarios. During challenging times, lenders may modify terms to support the company’s survival.
By carefully contemplating on these factors, companies can create a more sustainable and suitable funding structure that aligns with their current needs and objectives.
Keep in mind three different approaches. Clearly explain the ambition and unique selling proposition to attract partners with your business story. Create an equity story to communicate ambitions, needs and value creation to potential investors, aligning with their time horizon. Or identify and explain business strengths and cash flow generation to secure debt funding with a funded credit story.
At Ernest Partners, we assist in formulating the right story to engage stakeholders and secure funding for your business.
To optimize working capital, focus on reducing unpaid receivables (by invoicing more often and with shorter payment terms), minimizing inventories, funding unpaid receivables through receivable finance/factoring and reducing short-term debt by securing mid- and long-term credit lines.
Our dedicated team of experts unlocks the potential of your company’s working capital. We provide tailored financing solutions to support your business growth. In theory, working capital is calculated as assets minus liabilities. In practice, it represents the capital retained in unpaid receivables and inventory, after deducting all short-term debts linked to suppliers, tax offices and banks.
When seeking to attract new funds, consider these important factors. Companies may find themselves in situations where they need to increase their available capital through external sources. Think of embarking on a large investment program, pursuing an acquisition or undergoing business restructuring.
We advise you to define a comprehensive overview. When approaching fund providers, clearly present reasons for fundraising and demonstrate the ability to repay the funds at maturity to boost confidence. Diversify funding sources and explore different backup plans to ensure resilience. This ensures that the funding objectives can still be met if one of the intended parties withdraws during the process.
Identify and evaluate suitable financial instruments aligned with your company’s profile and specific needs. These may range from equity, public funds
Ernest Partners supports your company assessing your business, funding and liquidity situation, your business plan and forecasts, developing and quantifying possible scenarios for financing your activities, choosing the best scenario with your management and shareholders and reaching agreements with banks, institutions, debt funds, or other stakeholders.