Deleveraging the Business

Deleveraging the Business

The economy is in flux, interest rates are increasing and lenders are tightening their loan covenants. Business executives need to aware of how leveraged their business’s balance sheet is and the loan covenants that relate to the debt. Business executives need to understand the best method for them to deleverage their business.


Deleveraging is the act or actions taken by a business to reduce its leverage (debt). Businesses are sometimes forced to deleverage in a rapid manner by selling assets to pay down or off debt. When a business is unable to deleverage, the business can be perceived as a high credit risk for defaulting on its financial obligations.


Ways for a business deleverage:


  • Deferring or cancelling all capital expenditures.


  • Sell off unproductive assets, start with production equipment that is no longer in service.


  • Sell old and obsolete inventory, even if below cost.


  • Reduce operating expenses.


  • Reduce research and development expenses.


  • Shrink the business by reducing revenues. Reducing revenue will shrink the business’s accounts receivables, which will provide cash to the business.


  • Tighten customer credit policies.


  • Sell the business as a “going concern” to avoid bankruptcy.


All businesses are different, there are ways to deleverage the business to generate cash, while improving the business’s operations and increase profitability or selling the business.


No leverage problem goes away without action!


Please contact The Siburg Company anytime to discuss your business’s strategic plans.


The Siburg Company specializes in buy-side and sell-side mergers and acquisitions, and strategic planning consulting services.

Contact us at (480) 502-2800


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