Access to sufficient liquidity is more important than any time in recent decades. The financial crisis forced companies into insolvency that otherwise would never have had a problem. According to recent research1, liquidity has replaced earnings as the primary focus of the CFO.
The heart and soul of working capital financing is the revolving line of credit. Virtually every manufacture or distributor has to have one. But even service companies maintain one for managing cash flow variances.
We have developed an analytic methodology that can determine the statistical volatility of the cash flows of your business, and the liquidity necessary to avoid insolvency. We can then estimate the liquidity necessary to finance organic growth, meet seasonal needs, meet cyclical needs, and avoid financial distress. We can reduce your internally sustainable growth rate to an algebraic equation so you can conduct sensitivities using different assumptions about your business. We can also model your company to permit an outlook as far into the future as you wish to look, with detail you can drill down into.
The CFO’s priorities have changed from a focus virtually entirely on cost control to that of ensuring adequate liquidity. As discussed in a recent paper1in the International Research Journal of Finance and Economics, the insolvency of lenders was not the only problem for companies. Embedded risks – those in vendor and customer contracts – emerged as a critical focus. Companies were forced to re-access their policies and liquidity needs in light of weaknesses and risks exposed by the crisis.
The corporate treasury department is no longer merely a function for cash management. It is now a strategic function securing liquidity and understanding the true risk profile of the corporation. The treasurer is now much more involved in the management of the business and has become a business leader instead of an administrator. This transformation in role has placed a much higher demand on the skill sets of the treasurer and he or she must command the arts of communication and sales as any business area manager would.
We understand the needs of the owner and CFO in mitigating the risks of insolvency. We will help you assess your liquidity needs and navigate the ins and outs of lines of credit, regardless of whether it is provided by an FDIC insured institution or a private equity backed non-bank. We can assist with all types of Lines of Credit:
• Committed or Uncommitted / Secured or Unsecured / Seasonal / Reducing / Amortizing
• Mechanized asset based or Non-mechanized asset based
For more see: Raising Capital
1The New Role of the Corporate Treasurer: Emerging Trends in Response to the Financial Crisis http://ssrn.com/abstract=1971158