There are many companies that, despite being profitable from an operational point of view, have been suffocated by a cluster of debts derived from poor financial management. That is why, after the approval of Royal Decree-Law 4/2014 of March 7, announced by the Government. With the latest measures for contracting and financing SMEs, many will have the opportunity to refinance their debt thanks to new formulas that simplify and streamline processes.
The new regulation, which entered into force on March 9, modifies some aspects of the Bankruptcy Law 2003. It aims at companies with excessive debts not involved in the bankruptcy proceedings and can opt for new formulas to relieve the financial burden or “deleveraging.” Thus, the new measures aim to protect companies with debts when banks demand a necessary bankruptcy.
But what does all this mean? These new measures allow companies to reach more favorable agreements with their creditors (usually banks). It will enable them to request new financing to continue operating and deal with long-term debt. Also, it opens the possibility that creditor banks can convert part of their debt (which is not sustainable for the company) into capital.
Refinancing Formulas for Companies with Debts
Individual refinancing agreements: Refinancing agreements may reach one or more creditors if they improve the patrimonial position of the debtor without the need for significant liabilities.
Collective Refinancing Agreements not Judicially Approved
The independent expert report will no longer be necessary, and a certification from the auditor will prove that the concurrence of the required liability majorities is sufficient. These agreements may not terminate later (unless they fail to comply with the requirements) if the debtor comes into bankruptcy proceedings.
Collective Refinancing Agreements Judicially Approved
The judge will only have to verify the concurrence of the required majorities. That is 51% and not 55 until now—the formal requirements to agree on their approval. The agreements, once approved, may not be terminated if the debtor comes to enter bankruptcy proceedings.
Although the new measures aim to prevent the liquidation of companies, they can continue to operate and contribute to the generation of wealth and employment. It seems that they are more destined to solve the financial problems of the enterprises and financing paths. It includes a medium-sized enterprise and a smoothness for Small businesses and freelancers, who are precisely those who find the most difficulties when accessing credit.
The Best Financing Measures to Get Rid of Debts
Managing finance has multiple complexities, especially when it comes to running a small business. Often, the owners of such companies need a reasonably obvious method for completing the rundown of what they wish to have.
Reset your Budget Plan
You must have a complete record of your current and updated financial status for business management processes. For this, you will have evaluated your business operations and the level of money transactions. It would be best if you used all your financial key performance indicators. You must know when, where, and how you have spent your money and what resources you have used, including your rent.
Hire the best bookkeeper or accountant to evaluate your business budget. You can also consider free businesses that offer different workshops on business budget management. Use accounting software to automate the budget process. QuickBooks can be the best choice for you. Using it, you can monitor the smoothness of your business’s cash flow.
Cut Your Expenses
Check your total business expenses and operating costs. Look at your daily expenses, services, and operations, then evaluate them by cutting the rest. Check out which subscriptions and memberships you use rarely. Then, I decided to suspend all of them. Strive to negotiate with certain vendors for prices and flat rate reductions. Track the expenses of your advertising channels that give relatively little profit. Find out a single thing that adds up to substantial business debt. Pinpoint all these expenditures that increase your debt. In this way, you will have better cash flow, and there will be a significant reduction in the business debt burden.
Temporary Cash Payment
Change your business expense management that will bring your small business proceedings under control. Pay all your credit card bills on time if you want to shop online. Also, you can avail of loan services of any amount.
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