In today's economic environment, one of the biggest challenges for the rental owner is credit. On the debt restructure side, the banks are not entertaining any additional risk, unless it is to protect their present position with a client.
In years past we could roll up debt to one or two lenders and accomplish the restructure. But today, each bank is standing alone, and looking at the credit alone. In the restructures we have completed since the first of the year, lenders are requesting much longer debt structure (18 - 24 months), accompanied by forecasting that shows little-to-no growth in revenue during that same period.
On the new equipment purchase side, credit is even tougher and I believe this will continue to be an issue for the next few years. Some of the traditional lenders on construction equipment have decided to exit this market segment, which will make credit that much more difficult to find. But remember, as I mentioned in one of my previous columns, a debt restructure is better in your credit report than delinquent payments to your lenders.
Future editions of Financial Forum will describe in more detail the probable value of debt restructuring and how it works.
Questions or comments? Contact Mike Farley at firstname.lastname@example.org.