Financial structure red flags-are you at risk?

New Zealand’s post-COVID economic landscape has seen significant shifts particularly for businesses grappling with cashflow, tax & ACC obligations, and lender arrears. As companies strive to navigate these challenges, restructuring has emerged as a pivotal strategy to not only survive but thrive in a competitive market.

Quantum's Commercial Finance team have been exploring the reasons behind financial restructures, the implications for businesses, and how, using simple strategies, you can strategically reposition yourself for success.

New Zealand’s economy, known for its resilience, is not immune to global economic fluctuations. Recent data indicates that many businesses are facing increasing pressure from tax liabilities, outstanding debts to lenders and supplier/creditor pressure. These scenarios have prompted numerous organizations to reconsider their business finance strategy and operational structures in an effort to both maintain their current market presence and increase growth.

Red flags your financial structure is putting everything at risk

1. Growing Tax Burdens: With heightened scrutiny from the Inland Revenue Department (IRD) businesses are feeling the pinch. The need for compliance can feel overwhelming, particularly for small to medium enterprises (SMEs) that often lack the resources to manage complex tax obligations efficiently. With another 250+ new tax-arrear-chasing-roles being filled, its widely known that the IRD have become increasingly more reluctant to provide the level of assistance previously exhibited when it came to forgiving penalties.? ?
2. Business debt balance:? Often seen in New Zealand is the imbalance of Core Business Debt (long-term debt) and Working Capital Finance (day-to-day, short-term debt).? Structured incorrectly, a business will be carrying their Core Business Debt using expensive, short-term funding facilities-a constant finance tightrope without any safety net!
3. Stand-alone business debt:? If your business debt does not stand alone from your personal assets, or at the very least you don’t have a financial plan to get to this point, you’re dancing with the devil, leaving your family security open to loss.
4. Lender Pressure: The tightening of lending criteria following global financial uncertainties has left many businesses in a precarious position. With mounting arrears, companies are forced to reassess their financial strategies to avoid default.? A need for an honest, unbiased, expert assessment is needed sooner rather than later.

Financial Restructuring and why it could be your best move in 2024-2025

Restructuring can take various forms, including operational changes, financial reorganization, or even downsizing. Quantum’s Business Finance Rescue Packages have helped many New Zealand companies not only get back on their feet, but back on the property market, family intact!

Here are some of the steps our Commercial Finance team at Quantum can help you with during this process:

• Financial Health assessment: We can conduct a thorough review of your financial statements, to help you in gaining a more accurate understanding of your liabilities and assets.
• Business Debt Structure assessment:? We can walk you through options for better structuring of your business debt in a more cost-effective way.? You’ll learn how to use your property assets to raise cost-effective longer-term capital business debt, saving you money, whilst protecting any leveraged property.
• Stand-alone Business Debt Plan:? If you don’t have a “get-out-of-jail plan” in place for the separating of your business and personal assets, we’ll work with you to put one in place.? We’ll help you identify your risks; the realities, and the needed solutions associated with any combined business and personal incomes, and then show you how to restructure your lending to create security and freedom, avoiding the common theme of SME’s behooved to a single lender.

Don't bury your head in the sand

Trusting in our reputation for integrity-based servicing and confidentiality, our judgement-free environment will get straight to the nuts n bolts behind all your hard work and sacrifice.?

And our “why” is as simple as the process itself - we want to help you get it right, and when we do, we just ask you tell a friend or two!

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Contact Quantum's Commercial Finance Team

Lincoln Davie - Managing Director & GM-Mortgage Finance

Darren Fitness - GM-Commercial Finance

Nicki Smith - Mortgage & Business Finance Adviser

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