Some Business Statistics What is Debt Restructuring The Warning Signs Business Questions to Answer Classifying Creditors Calculating a Monthly Budget Writing a Hardship Letter Business History Profile Payment Plan Cover Letter Initial Re-Payment Offers Other Basic Strategies to Reduce Debt In this presentation we’ll discuss: Practical Strategies to Restructuring Business Debt

Some Business Statistics

What is Debt Restructuring

The Warning Signs

Business Questions to Answer

Classifying Creditors

Calculating a Monthly Budget

Writing a Hardship Letter

Business History Profile

Payment Plan Cover Letter

Initial Re-Payment Offers

Other Basic Strategies to Reduce Debt

Small firms: Represent approximately 99% percent of all employer firms. Employ half of all private sector employees. And pay more than 45% of total U.S. private payroll. Have generated 60 to 80% of net new jobs annually over the last decade. Create more than 50% of non-farm private gross domestic product (GDP). Sources: U.S. Bureau of the Census; Federal Procurement Data System; Bureau of Labor Statistics, Current Population Survey; U.S. Department of Commerce, International Trade Administration.

Small firms:

Represent approximately 99% percent of all employer firms.

Employ half of all private sector employees.

And pay more than 45% of total U.S. private payroll.

Have generated 60 to 80% of net new jobs annually over the last decade.

Create more than 50% of non-farm private gross domestic product (GDP).

Sources: U.S. Bureau of the Census; Federal Procurement Data System; Bureau of Labor Statistics, Current Population Survey; U.S. Department of Commerce, International Trade Administration.

Small firms also: Supply more than 20% of the total value of federal contracts. Produce 13 to 14 times more patents per employee than large patenting firms. These patents are twice as likely as large firm patents to be among the one percent most cited. Are employers of over 40% of high tech workers (such as scientists, engineers, and computer workers). Are over 50% home-based and 3 percent franchises. Make up an average of 97% of all identified exporters and produced approx 29% of the known export value. Sources: U.S. Bureau of the Census; Federal Procurement Data System; Bureau of Labor Statistics, Current Population Survey; U.S. Department of Commerce, International Trade Administration.

Small firms also:

Supply more than 20% of the total value of federal contracts.

Produce 13 to 14 times more patents per employee than large patenting firms. These patents are twice as likely as large firm patents to be among the one percent most cited.

Are employers of over 40% of high tech workers (such as scientists, engineers, and computer workers).

Are over 50% home-based and 3 percent franchises.

Make up an average of 97% of all identified exporters and produced approx 29% of the known export value.

Sources: U.S. Bureau of the Census; Federal Procurement Data System; Bureau of Labor Statistics, Current Population Survey; U.S. Department of Commerce, International Trade Administration.

How many businesses open and close each year?

How many businesses open and close each year?

Annual estimates for businesses with employees: 672,000 new startup firms and 545,000 closures (* both are estimates and averages about 10 percent of the total)

Annual estimates for businesses with employees:

672,000 new startup firms

and 545,000 closures

(* both are estimates and averages about 10 percent of the total)

For those closures, the clock was ticking Research shows the majority of closures is the result of cash flow issues and the burden of debt www.bnkrsu.com

What Is Debt Restructuring?

Debt Restructuring is the process of negotiating new payment terms with existing creditors

The purpose is to satisfy your creditors on a budget you can realistically afford.

In Restructuring Debt, You Have to See…

In Restructuring Debt, You Have to See…

The Warning Signs

The Warning Signs

Cash flow isn’t enough to handle all the expenses Debts are continually put off Some new or negotiated payment terms with creditors have now become a burden . The Warning Signs

Cash flow isn’t enough to handle all the expenses

Debts are continually put off

Some new or negotiated payment terms with creditors have now become a burden .

Running past due on more than a third of payables Shuffling to pay smaller creditors verses larger Bouncing checks or have been contacted by collectors The Warning Signs

Running past due on more than a third of payables

Shuffling to pay smaller creditors verses larger

Bouncing checks or have been contacted by collectors

When these signs are present, it’s time to develop a practical and realistic plan to satisfy creditors and survive

You’re not alone…

Reduce Costs Increase Income Restructure Liabilities Restructure Assets Raise more Capital Exit the Business www.bnkrsu.com Basic Strategies to Get Out of Excessive Debt

Reduce Costs

Increase Income

Restructure Liabilities

Restructure Assets

Raise more Capital

Exit the Business

Reduce Costs There are two principle ways to reduce costs: look for big savings, or make small cost reductions across the board. To make savings across the board, set a savings target (say, 10%) and reduce each budget by that amount. Then take small steps to reduce traveling costs or opting for equipment alternatives or leasing, etc. 2. Increase Income Increasing the amount of money flowing into your business, as in increased marketing, cross-selling to existing customers, offering special deals for additional or advance orders, getting referrals with other organizations and/or affiliates. Raise your prices based from a comprehensive study. Find alternative sources of income. Rent unused office space, consider selling advertising space on your website (Google Adsense, YPN, MSN Adcenter, affiliates) or in physical spaces you have available, obtaining commissions from other organizations. www.bnkrsu.com

Reduce Costs

There are two principle ways to reduce costs: look for big savings, or make small cost reductions across the board.

To make savings across the board, set a savings target (say, 10%) and reduce each budget by that amount. Then take small steps to reduce traveling costs or opting for equipment alternatives or leasing, etc.

2. Increase Income

Increasing the amount of money flowing into your business, as in increased marketing, cross-selling to existing customers, offering special deals for additional or advance orders, getting referrals with other organizations and/or affiliates.

Raise your prices based from a comprehensive study.

Find alternative sources of income. Rent unused office space, consider selling advertising space on your website (Google Adsense, YPN, MSN Adcenter, affiliates) or in physical spaces you have available, obtaining commissions from other organizations.

3. Restructure Liabilities Restructure liabilities for more cash, and/or reduce the amount of debt. Agree to longer or reschedule payment terms with suppliers. Replace or consolidate existing loans with lower interest rates. Defer tax liabilities (requires specialist tax advice). There are two other principle ways to reduce costs: look for big savings, or make small cost reductions across the board. For savings across the board; set a savings target (of approx. 10%) and reduce each budget by that amount. Reduce misc. costs or opt for equipment alternatives, leasing, etc. 4. Restructure Assets Sell unnecessary assets (example: surplus/old equipment, cars) Convert necessary assets into liabilities: sell to a finance company and lease them back. Factor invoices (this can reduce the asset value of the invoice, but can raise immediate cash). Use investments or cash to pay off loans.

3. Restructure Liabilities

Restructure liabilities for more cash, and/or reduce the amount of debt.

Agree to longer or reschedule payment terms with suppliers.

Replace or consolidate existing loans with lower interest rates.

Defer tax liabilities (requires specialist tax advice).

There are two other principle ways to reduce costs: look for big savings, or make small cost reductions across the board.

For savings across the board; set a savings target (of approx. 10%) and reduce each budget by that amount. Reduce misc. costs or opt for equipment alternatives, leasing, etc.

4. Restructure Assets

Sell unnecessary assets (example: surplus/old equipment, cars)

Convert necessary assets into liabilities: sell to a finance company and lease them back.

Factor invoices (this can reduce the asset value of the invoice, but can raise immediate cash).

Use investments or cash to pay off loans.

5. Raise more Capital Find investors or sponsors. Issue more shares to current investors. Obtain grants if applicable. 6. Exit the Business Sell the business. Sell off all or limited business assets (including the business goodwill, or partial client base) and use the proceeds to pay off liabilities of issue. www.bnkrsu.com

5. Raise more Capital

Find investors or sponsors.

Issue more shares to current investors.

Obtain grants if applicable.

6. Exit the Business

Sell the business.

Sell off all or limited business assets (including the business goodwill, or partial client base) and use the proceeds to pay off liabilities of issue.

A Practical Action Plan

A Practical Action Plan

A Practical Action Plan Business debt can be a good thing and working through it can be a very stressful event. It can help you to establish your business, fund growth or invest for the future. On the other hand, if the level of borrowing becomes excessive it can lead to many problems without a practical action plan. www.bnkrsu.com

Business debt can be a good thing and working through it can be a very stressful event. It can help you to establish your business, fund growth or invest for the future.

On the other hand, if the level of borrowing becomes excessive it can lead to many problems without a practical action plan.

A Practical Action Plan If the level of borrowing becomes excessive it can lead issues such as: Running out of cash No contingency to deal with unexpected costs Reducing the value of the business Losing the confidence of stakeholders Inability to invest Reduced service/product quality Employee conflict and many more... www.bnkrsu.com

If the level of borrowing becomes excessive it can lead issues such as:

Running out of cash

No contingency to deal with unexpected costs

Reducing the value of the business

Losing the confidence of stakeholders

Inability to invest

Reduced service/product quality

Employee conflict and many more...

In a turbulent time it’s important to remember a few vital steps www.bnkrsu.com

Businesses in a Restructure Process Need To: Realize that the business is in economic crisis Reinvent the business mission and vision Redefine the business’ value proposition Refinance the business

Realize that the business is in economic crisis

Reinvent the business mission and vision

Redefine the business’ value proposition

Refinance the business

Redefine leadership and roles Rethink marketing and communication Redistingush from competitors Resign the organization and network Businesses in a Restructure Process Need To:

Redefine leadership and roles

Rethink marketing and communication

Redistingush from competitors

Resign the organization and network

Some Other Things to Consider Before Restructuring and Questions to Answer

Some Other Things to Consider Before Restructuring and Questions to Answer

First, what is the future potential of the business? Then, is restructuring worth the time and energy that it takes to work on a recovery process? Is the business willing to revise and renegotiate?

First, what is the future potential of the business?

Then, is restructuring worth the time and energy that it takes to work on a recovery process?

Is the business willing to revise and renegotiate?

Which debts need to be restructured and their amounts? What amount can be realistically put towards these debts?

Which debts need to be restructured and their amounts?

What amount can be realistically put towards these debts?

How Should Creditors be Restructured?

How Should Creditors be Restructured?

A Framework for Recovery

A Framework for Recovery

What a realistic amount to pay on a consistent monthly basis toward excessive debts? What is your cash flow and how much is left on average each month without designated restructured debts amounts? How Much Can You Afford Each Month?

What a realistic amount to pay on a consistent monthly basis toward excessive debts?

What is your cash flow and how much is left on average each month without designated restructured debts amounts?

 Hardship Letter  Business History and Profile  Payment Plan Cover Letter  Initial Re-Payment Proposal Writing A Proposal and What To Include

 Hardship Letter

 Business History and Profile

 Payment Plan Cover Letter

 Initial Re-Payment Proposal

Any personal tragedy such as a serious illness, divorce or death in your family. Any disaster, such as a fire, flood or property damage adverse weather issue. If you are behind on any taxes and whether there are any tax liens against you or other debts. If your home is in, or close to being in default or foreclosure. Writing Your Hardship Letter Can you demonstrate your hardship? If so, creditors may be persuaded to go beyond their normal outstanding balance settlement parameters. A hardship letter is personally addressed to the creditor and should adequately describe the issues affecting you and your business that have contributed to your financial dilemma . A template hardship letter should include things like : If you are personally liable and you have little or no assets or equity in your home. The loss of key equipment due to repossession or breakdown. Any secured loan that is in default or is in the process of consolidation. Any existing lawsuits or changing regulatory issues.

Any personal tragedy such as a serious illness, divorce or death in your family.

Any disaster, such as a fire, flood or property damage adverse weather issue.

If you are behind on any taxes and whether there are any tax liens against you or other debts.

If your home is in, or close to being in default or foreclosure.

If you are personally liable and you have little or no assets or equity in your home.

The loss of key equipment due to repossession or breakdown.

Any secured loan that is in default or is in the process of consolidation.

Any existing lawsuits or changing regulatory issues.

Business History Profile Your profile should be in a checklist format and include a detailed analysis of the following items: Your general company information. Start date, business type and company description. Financial hardship and how the company has been affected in the areas of – Sales, Cash Flow, Expenses and/or Operations. Three year sales history verses expenses and net profit. Lawsuits or judgments pending, taxes owed or any other extenuating circumstances. Actions taken to resolve the debt issue.

Your profile should be in a checklist format and include a detailed analysis of the following items:

Your general company information.

Start date, business type and company description.

Financial hardship and how the company has been affected in the areas of – Sales, Cash Flow, Expenses and/or Operations.

Three year sales history verses expenses and net profit.

Lawsuits or judgments pending, taxes owed or any other extenuating circumstances.

Actions taken to resolve the debt issue.

The Cover Letter Should include: Your contact information on company stationary. A brief introduction along with an explanation of your current financial situation. A request in working together to resolve your debt issue and reference review of the attached documents. Respectfully ask the creditor to hold off on any legal action and ask for their help in attempting to save the business.

Should include:

Your contact information on company stationary.

A brief introduction along with an explanation of your current financial situation.

A request in working together to resolve your debt issue and reference review of the attached documents.

Respectfully ask the creditor to hold off on any legal action and ask for their help in attempting to save the business.

Variance Initial Re-Payment Proposal Separate creditors into classes. Example: Class A, B, C, D, etc Rate Class A creditors for minimum amount of total debt they will accept as settlement. For example 16% to 20% of the total amount to be paid in full within one month. Rate Class B creditors who will accepts 30% to 35% of the total debt to be paid in three or four monthly installments with first payment deferred for two to three months. Rate Class C creditors who will only accepts a minimum of 60% to 70% of the total debt to be paid in seven to eight monthly installments and deferred to begin in six months.

Separate creditors into classes. Example: Class A, B, C, D, etc

Rate Class A creditors for minimum amount of total debt they will accept as settlement. For example 16% to 20% of the total amount to be paid in full within one month.

Rate Class B creditors who will accepts 30% to 35% of the total debt to be paid in three or four monthly installments with first payment deferred for two to three months.

Rate Class C creditors who will only accepts a minimum of 60% to 70% of the total debt to be paid in seven to eight monthly installments and deferred to begin in six months.

Variance Initial Re-Payment Proposal Rate Class D creditors who want to be paid in full only with one lump sum to be negotiated for payment after twelve months or more based on agreement. Rate Class E creditors who will accept a combination of class agreements and monthly installment payments. Agreements : By both (the business and the creditor) should include a cease to any and all collection efforts unless there is a default in the agreement. All workable payments plans should be reviewed by a financial advisor as results will vary based business debt and revenue factors.

Rate Class D creditors who want to be paid in full only with one lump sum to be negotiated for payment after twelve months or more based on agreement.

Rate Class E creditors who will accept a combination of class agreements and monthly installment payments.

Agreements : By both (the business and the creditor) should include a cease to any and all collection efforts unless there is a default in the agreement. All workable payments plans should be reviewed by a financial advisor as results will vary based business debt and revenue factors.

Put aside your monthly budget like clockwork, even if no payments are scheduled to go to creditors. Keep a good accounting of your reserve funds. Just because a settlement sounds good, it doesn’t mean you can afford it. Be conservative and understand situations will vary. Don’t promise more than you can deliver. Don’t be in a rush to settle what you can’t afford to pay. Cut expenses. If feasible, scale back on an employee or an expense that doesn’t translate to revenue. A Few Tips to Remember

Put aside your monthly budget like clockwork, even if no payments are scheduled to go to creditors.

Keep a good accounting of your reserve funds.

Just because a settlement sounds good, it doesn’t mean you can afford it. Be conservative and understand situations will vary.

Don’t promise more than you can deliver. Don’t be in a rush to settle what you can’t afford to pay.

Cut expenses. If feasible, scale back on an employee or an expense that doesn’t translate to revenue.

6. Don’t avoid creditor calls… communicate consistently. 7. Some collectors can be rude. Never sink to their level. If they are unprofessional, ignore rudeness and maintain composure. 8. Contact the creditor if you fall behind on scheduled payments and work out a time to resume payments. Don’t send any further payments unless the creditor agrees to accept the future payments under the existing terms. A Few Tips to Remember

6. Don’t avoid creditor calls… communicate consistently.

7. Some collectors can be rude. Never sink to their level. If they are unprofessional, ignore rudeness and maintain composure.

8. Contact the creditor if you fall behind on scheduled payments and work out a time to resume payments. Don’t send any further payments unless the creditor agrees to accept the future payments under the existing terms.

Even if you’re on the right track, you’ll get run over if you just sit there. Will Rogers Obstacles in Restructuring Debt?

Even if you’re on the right track, you’ll get

run over if you just sit there.

Will Rogers

so there you have it…

a little something about us… Banker’s U is the Training, Marketing and Consulting resource for building performance. Certified Business Advisors have years of “hands on” business operations experience. We listen… and come packed with knowledge, wisdom and objectivity Bringing real world practical solutions to all types of clients – we create custom training, presentations, mentoring and profit building strategies that are actionable and results driven to suit your needs Visit Us at www.bnkrsu.com

Banker’s U is the Training, Marketing and Consulting resource for building performance.

Certified Business Advisors have years of “hands on” business operations experience. We listen… and come packed with knowledge, wisdom and objectivity

Bringing real world practical solutions to all types of clients – we create custom training, presentations, mentoring and profit building strategies that are actionable and results driven to suit your needs

Visit Us at www.bnkrsu.com

Banker’s U Training Marketing Consulting Website: www.bnkrsu.com Email: [email_address] 707-658-2000 For the full version of this presentation Please contact us Copyright All Rights Reserved Please note : Nothing in this presentation can be used or reproduced whole or in part without the express consent of Banker’s U. Please contact us for more information.

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