As a legacy of the private equity boom an increasing number
of companies are now finding their activities largely targeted to satisfying
their repayment obligations to the Banks. Companies are finding their growth
restricted as money which is needed for new projects is swallowed up in
servicing debt.
Over the next four years British companies owned by private
equity firms must repay or refinance £100 billion of debt.
The Banks that formerly were willing to take a more lenient attitude
and renegotiate loans are playing by much harder rules.
As more and more companies find their ability to borrow
restricted, they have to revisit their own payment terms with their customers.
It becomes a vicious circle from which very few are immune.
The key is to make the most of available cash resources
which inevitably leads to some hard commercial decisions. Late payers are a
luxury that no company can afford in this climate. Stock must be turned as
efficiently as possible.
Those who either will not or cannot adapt to the demands of
today’s business will join the growing
list of casualties.
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