As the COVID-19 pandemic continues to impact the U.S. business environment, businesses will need to increase focus on managing cash and liquidity in the near term and revise financial plans to strengthen their resiliency through recovery.
Below are some corporate finance tips and solutions for businesses to consider through this uncertain time:
Managing cash and liquidity:
- Implement a rapid cash management/13-week cash flow model diagnostic to understand your cash position and short-term working capital needs. (Learn more about our financial resilience solutions)
- Assess the potential for changes to your cash conversion cycle based on the current environment’s impact on your suppliers and customers.
- Consider changes to working capital practices (including inventory management) with a focus on business continuity and resilience.
- Reduce all non-essential expenses.
Revise financial plans for resilience
- Once your short-term financial needs are mapped out, consider assessing your longer-term financing alternatives.
- Begin financial modeling of multiple scenarios to assess the potential impact on 2020 budgets and projections for 2021 and beyond.
- Perform financial and liquidity stress tests and ensure appropriate contingencies are in place for downside scenarios.
Restructure existing debt and/or seek alternative financing options
- Consider renegotiating and restructuring loans and loan covenants if potential issues are uncovered in the financial scenario modeling.
- Prepare to raise new capital, including bank debt (credit lines/revolvers, commercial loans or asset-based loans), subordinated debt, minority equity and alternative financing (i.e., factoring, term-B loans, sale/lease backs) in the event of potential liquidity issues.
- Seek state tax credits and incentives available to businesses impacted by COVID-19.
- Assess divesting non-core corporate businesses or assets to generate cash.
As your business continues to navigate its financial needs during this time, Baker Tilly and Baker Tilly Capital, LLC can provide assistance in implementing these corporate finance tips and solutions for your business.
For more information on this topic, or to learn how Baker Tilly Capital specialists can help, contact our team.
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