Company Needs Funds to Acquire a New Building

Solution – A former client of ours contacted us as he was planning to move to a new facility and needed help to raise money to purchase the new building. He was planning to sell the existing facility which was too small and not configured properly for the expansion of the business.
We analyzed the situation and recommended he explore the possibility of acquiring the new property under a Like Kind Exchange. It proved to be feasible and ultimately saved our client approximately $200,000 of taxes that would have been payable upon the sale of the existing facility. These funds were able to be deployed instead toward the purchase price of the new building.
While we are not CPAs or attorneys, we have experience covering hundreds of transactions over many years, and can often suggest alternatives for our clients that they or their advisors may not have considered.

Cancellation of a Major Order Leads to Cash Flow Problems

Challenge – Cancelation of a Major Order Leads to Cash Flow Problems

Solution– A client had been working on a major project for over a year when it was determined that work could not continue unless the customer agreed to additional charges. When the customer declined, our client had to cease work on the project. Tremendous expenses had been incurred and, while some payment had been received, it was not enough to cover the expenses and disruption to the flow of business caused by repeated delays and unfunded rework on this project.

We assisted the client to identify the magnitude of the problem and establish a plan to move forward. We drafted a letter, explaining the situation to all of the key vendors involved with the project. We set aside the amounts due to the vendors for this program and it was paid out over a sixteen month period in equal installments. While not the normal commercial terms, all the vendors appreciated the information and being treated equally with other vendors. All went along with the program, allowing the company the time to earn sufficient profits and cash flow to meet these obligations. Not a single vendor was lost to the company in this process, nor did any vendor demand to be paid differently than the plan.

We have found repeatedly that objective assessment, development of a realistic plan, and active communication of the plan to all concerned parties is the basis of maintaining positive relations during a troubled time period.

SBANE Presentation Rescheduled 4/5/12

SBANE Logo

Boston Financial Resources is taking part in the rescheduled:

 Pathway to Asset Recovery With Your Bank 

Address: Reservoir Place 1601 Trapelo Road Edgartown Room Waltham, MA 02451 USA Map and Directions

Date:                 04/05/2012               

Time:                7:30 AM – 9:30 AM

Price: $59.00


 


“Pathway to Asset Recovery With Your Bank”

“Work Out…Work Through…Asset Recovery” are terms that describe companies that are transitioning back to profitability with their lenders.  Some lenders such as Eastern Bank and Middlesex Savings Bank take a patient approach to toward companies undergoing a transformation.  If you haven’t experienced a transfer of your loan from the conventional lending platform to an expert who specializes in rehabilitating troubled assets, this seminar is an excellent guide to that runway.

We have secured two seasoned bank veterans that concentrate on helping companies reposition their debt to a successful exit back to the commercial lending platform.  We also tapped two experienced turnaround management consultants that work with operating companies restructuring trade and bank debt toward aligning the company’s existing cash flow to their ability to satisfy a revised debt service capability.

Panelists:

  • John Farmer, Senior Vice President, Eastern Bank, Lynn, MA
  • Chuck Merrill, Vice President, Middlesex Savings Bank, Natick, MA
  • John Weeks, Principal, Boston Financial Resources, Boston, MA
  •  Jim O’Connor, Principal, The O’Connor Group, Bedford, MA

To Register Visit: http://www.sbane.org/registration-page/?regevent_action=register&event_id=62&name_of_event=ED12DPathwaytoAssetRecoveryWithYourBank

 

Case Studies: Growing Business but Losing Money

Growing Business but Losing Money

A client came to us with a serious problem: he had a growing business but was losing money; his lenders had lost faith in the company. The business had taken on considerable debt to fund specialized machinery that greatly expanded the company’s capacity. Although the business had grown, it still wasn’t operating near its new capacity. The lender’s withdrawal of a line of credit had meant the company moved to a factor to borrow against its receivables, incurring tremendous costs and fees.
We analyzed the situation and found that 1) the cost of capital had grown tremendously as this company had been forced to move to more and more expensive sources of capital, and 2) that the accountant had used a five year life for the new machinery, causing a very high depreciation amount that exacerbated the company’s losses. We were able to convince the accountant to restate the company’s results, according a fifteen year life to the specialized equipment. This action by itself added $1 million to assets and net worth, curing a deficiency in the capital account. Secondly, we showed what the company’s recent history would have been if it had been able to attract capital under more normal terms. In that case, the company would have been profitable, as the nearly $1 million of annual interest cost would have been substantially reduced. We were able to find a new working capital lender, reducing all in costs on the company’s line of credit by 12 points, and to bring in a new mortgage for the building, reducing that rate by 5.5 points. With these new facilities, the equipment lender decided to stay with the company and go forward.

Case Studies: Deposit to Purchase

Deposit to Purchase

A client had just concluded making an acquisition of a business and after two years of renting the facility from the former owner, he was desirous of buying the property and creating a platform for making his occupancy costs more predictable.  The problem was that in accomplishing the initial purchase of the business, the balance sheet had been leveraged beyond what conventional lenders might consider a reasonable margin of safety.  Worse, the client did not have the necessary down payment to seek conventional or alternative mortgage financing.  A solution was identified whereby our client would enter into an agreement to buy the property on a deferred basis and instead of making his earlier rent payments, they would take the form of a non-refundable deposit against the purchase price.  By way of example, if the property was appraised at $1 million, the deposit to buy would be $8,333/month.  At the end of the first year, a deposit of $100,000 would have been completed or 10% of the agreed upon price.  Our client had the option of continuing to extend the deposit for an additional year before seeking financing.  Thus, the purchase price would have been $1.1 million ($100,000 of which would have already been deposited) and at the end of the second year he would have accumulated $200,000 in aggregate deposits or roughly 18% of the agreed upon price ($200,000/$1,100,000).  The seller did not have to declare the deposits as income since they were merely non-refundable deposits and the buyer (our client) did not have to expense the payments as rent, thereby increasing his earnings and reducing the leverage incurred from the initial purchase of the business on a more accelerated basis.  When the deposit to buy strategy was completed, the seller of the property recognized the transaction as a capital gain and not ordinary income, thereby significantly lowering his tax burden.  The result was a win-win for both buyer and seller.