Not so Free Money

Throughout the pandemic the government borrowed billions of dollars, lots of which made it into the pockets and accounts of consumers and businesses. For many, this was a much needed lifeline to get them through lockdowns, delays, and additional costs of complying with health requirements. However, that money has a delayed cost. We are all facing rising inflation and rising interest rates but businesses are also facing some unique challenges. 

Some businesses took advantage of this funding to innovate, reinvest and strengthen their business and are coming out of this stronger than before. However, for others, free and subsidized government funding or loan guarantees in some cases have masked issues with businesses’s underlying fundamentals, have allowed businesses to delay responding to shifting market demands and in some cases have left companies with more leverage than they can sustain going forward. 

Although we are only days into 2023 the credit markets already look a little different. Particularly in the private debt space, we’re seeing some contraction in credit terms and retrenching to more traditional fully-collateralized credit structures. Deals that were getting done six to twelve months ago are being orphaned. Similarly, the tier 1 banks are starting to take a hard look at their commercial debt books and are starting with their troubled loans. Some of the patience that borrowers were experiencing has run out and they are finally needing to find alternative solutions. 

However, these programs (CEBA, BCAP, etc.) were exclusively being provided by banks and cannot be assumed by an alternative lender. In cases where the business fundamentals don’t support a full take-out of all debts, businesses are being forced to get creative and navigate a complex negotiation between their bank’s special loan group and their new alternative debt provider. Whether you’re in the thick of it or anticipating challenges on the horizon, bringing in an advocate to help navigate these conversations can take the pressure off management and improve outcomes. We bring ideas and solutions from across the market and have insider experience working with your bank.