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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