Debt Refinancing is replacing existing debt with another debt instrument with more favourable terms and/or conditions. An example of debt refinancing would be borrowing a 10-year note at a 10% interest rate to pay off a 3-year note with 20% interest. Another good example would be refinancing a 10-year note previously secured against Real Estate, which now needs to be freed from serving as collateral.
The subject debt can be refinanced with a similar loan secured with receivables or Plant and Equipment (P&E) as collateral. Debt refinancing could help improve the financial cash flow of the business and, in some cases, increase the business’s book value if the company is funnelling through a buyout or a merger phase by freeing up some assets that secure the existing loans.
Reasons why any company should consider refinancing their debt on an ongoing basis:
At Avon River Ventures, we are business-friendly liquidity partners. Our debt refinancing process involves comprehensive diligence and a review of the Balance Sheet and Income Statement to analyze your company’s debt and its cost of borrowing. If your company has a cash flow problem, we furnish and facilitate a refinancing transaction to ensure such a problem does not recur in the future.
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