Debt Restructuring
Debt Restructuring’s Purposes
A debt restructuring a win-win situation for both the borrower and lender. It helps reduce the losses suffered by shareholders and allows for a more flexible schedule for the borrower, thereby protecting their interests. Overall, it develops a more efficient and transparent support system.
Asset Reconstruction Company (ARC)
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What are ARCs?
Asset Reconstruction Companies (ARCs) acquire a portion of a bank’s loans that are classified as Non-Performing Assets (NPAs). These companies step in when a bank opts to minimize its losses, streamline its financial statements, and refocus its operations on more promising opportunities. An ARC loan is facilitated by a specialized financial entity that purchases the bank’s non-performing debts at a negotiated price and undertakes the responsibility of recovering the outstanding amounts.
Such companies, known as ARCs, are governed by the Reserve Bank of India (RBI) and operate under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (commonly referred to as the SARFAESI Act, 2002).
Refinancing an ARC loan means substituting the existing loan from an ARC with a fresh loan from a different financial institution. The goal of this process is to obtain better loan conditions and lower interest rates, which leads to reduced monthly payments and improved cash flow for the borrower.
If you’re considering refinancing your ARC loan, we are here to help.
We at Prusage brings extensive experience in providing refinancing solutions across various industries. Understanding the unique financial needs of our clients, we work closely with them to develop solutions tailored to their specific requirements.
Our refinancing services are designed to lower overall borrowing costs and increase financial flexibility for our clients. By gaining a deep understanding of individual financial needs, we create personalized solutions that effectively meet those needs.
Consult our team of experts to learn more about refinancing an ARC loan or transferring a loan account from an ARC.
In situations of financial turmoil, Debt restructuring is a process used to restructure the terms of an existing debt by a borrower, as an alternative to be categorized as a defaulter or to avoid bankruptcy. It includes extending the due dates, bargaining for lower interest rates etc.
When a debtor is in an unfavourable or disadvantageous situation hindering the ability to repay its existing debt, Debt restructuring in a beneficial solution. Creditor may even offer stock in exchange to settle of the debt.
Process of Debt Restructuring
Debt restructuring can be done in a number of ways:
a) Interest rate reduction
b) extending the due date
c) Modifying the sanction’s parameters, such the margin
d) Changing debt into equity or comparable securities
e) Combining several loans into one and rearranging the payback plan to adhere to the initial timeline
f) Avoiding interruptions to business
g) Timely payment of debts using projected cash flows in the future.
Benefits of Debt Restructuring
Debt restructuring supports the sustainability of your business and contributes to its survival.
Some of the key benefits are as below:
Restructuring the terms of the debt such as lower interest rate, due dates, reduced number of instalments etc. help release immediate funds such as cash
Earlier, loans may be sanctioned at a high rate of interest due to urgency of requirement of funds. A Debt restructuring plan facilitates a lower rate of interest thereby saving your organization from excessively high rate of interest. Thus, allowing the use of funds for plans and goals.
In case your business has multiple loans. A Debt restructuring plan will help combine multiple loans into one unified loan thereby enabling you to plan your finances more structurally and soundly. Debt consolidation will help you to convert multiple loans into one with an orderly repayment schedule as per your cash flows projections.
Prusage supports businesses in situations of financial turmoil and help overcome hindrances. We help you revive your stability by offering expert services in corporate debt restructuring, loan restructuring and strategic solutions.
As a prominent debt restructuring firm, we specialize in navigating the complexities of managing debt and delivering customized solutions to optimize your financial health.
Whether you’re looking for guidance on debt resolution or restructuring, we provide comprehensive services tailored to your needs.