We hear it from CEOs and CFOs across the country – “inflation is eating me up.” This year has been tumultuous for some companies and for the economy as a whole.
As of June 2022, the 12-month inflation rate in the United States was at 9.1 percent on select goods and services.1 Costs and interest rates are rising, so if you are an asset-based company looking to upgrade or acquire new equipment or vehicles, you may be hesitant, or feel restricted by current loan agreements not allowing you to invest in new assets. Despite the current jump in interest rates and costs, with EFFI there is still opportunity to reposition your balance sheet sooner than expected and free up cash flow to close out 2022.
Companies in construction, food production, infrastructure, mining, transportation and aviation rely on the best equipment in order to operate. EFFI makes it possible to free up cash flow and get a better structured on current debt, or free up enough liquidity to purchase new equipment.
During lean times, smart companies push forward with decisions that create flexibility now and ROI in the future. Whether the goal is survival through tough times, acquiring a new lease or loan, or to get a better deal on current equipment – EFFI has years of experience creating Well-Structured deals, including refinance deals.
In the past, we’ve worked with companies to generate the monetary flexibility needed for them to perform in their respective markets in the near-term, while also improving five and ten year outlooks. Here’s five tips we can give you when evaluating your balance sheet before moving forward with corporate debt repositioning:
Tip 1: Make Sure the Lender Has Capacity
EFFI has refinanced equipment deals up to $40MM with a limit of $75MM per entity name. Whether it’s refinancing or restructuring, EFFI can get the deal done for you. Not all lenders have the experience and creativity like our financial teams. When we sit down in a room to structure a refinance or new equipment loan, we bring the capacity to negotiate and communicate options that otherwise would not have been realized. Our experience in equipment financing has afforded us a strong understanding of how to lead companies through this process.
To create a Well-Structured deal we make sure you’re seeing the best possible return on investment by pinpointing tax break considerations and cash savings opportunities.
Tip 2: Consolidate Your Balance Sheet for Best Optics
As you know, repositioning your debt to improve ratios at the year end is going to help when it comes to putting your company in a position for growth. Many CEOs and CFOs have questions relating to the current state of the economy and the skyrocketing of inflation rates. How will this affect interest rates? How can I keep ahead on my current loans when costs continue to rise?
EFFI cuts through the chaos and creates clarity by focusing only on factors that affect the deal we are working on together. Refinance deals with EFFI consist of creative solutions and conditions included such as better amortization, new balloon payment and extended interest-only periods allowing you the time and flexibility to keep your company strong at the end of the year and into 2023.
Tip 3: Compare Asset Value to Optimizing Cashout Opportunities
Calculate appraisal value of the assets you are refinancing to make sure the asset value is greater than the debt. This is most likely a given to anyone considering a refinance or new loan, yet it is worth mentioning. We do this with advance ratios, amortization, and other value components which can help contribute to the overall cash flow for the borrowers. It’s important to consider these benefits in the overall strategy.
In addition to managing pre-refinance vs post-refinance cash-flow projections, consider the potential value of new ventures made possible with more cash. Think acquiring companies, investing in your workforce, seasonal working capital needs, and end of year planning. This should factor into your five and ten year growth potential.
Tip 4: Consider the Length of a New Deal
It may make sense to negotiate for a longer term deal, as it may mean better interest rates. Of course an effective spending strategy is crucial when signing into a longer amortization deal. Make sure your strategy takes into account the latter years of this new deal. EFFI structures our deals to increase cash flow for borrowers five and ten years out. Be sure to ask about short terms with long amortization options.
Tip 5: Stick to Your Budget
As mentioned before, effective planning strategies are crucial to the success of a refinance or loan deal. Create a plan before finalizing your deal and stick to it. Make sure that you have carefully considered your revenue and the new expenses that would come after signing the new deal. It’s important to stick to the budget or you put yourself at risk of missing out on your goals for the new deal outcomes.
We can provide a bridge to cash flow with a Well-Structured refinance deal. We have handled major refinance plans up to $40MM for construction, food production, infrastructure, mining, transportation and aviation companies. Simply put, EFFI will help create the best value for refinancing for the purpose of obtaining new equipment or cashing out on it. Get out from underneath ill-structured debt before the year ends by contacting us today.
Related Reading: Has Inflation Peaked?