COVID-19 has had a major impact on Canada’s banks with large loan loss provisions expected. The resulting tightening of lending parameters will see many Canadian businesses unable to obtain new borrowing or even renew current borrowing. Banks have initiated new, far more restrictive lending requirements BEFORE increases to credit facilities or establishing new relationships. This includes the commitment to renew facilities.
In responses to this new reality, HS & Partners LLP is now offering a Bank Borrowing Facility Stress Test Program allowing business to proactively ascertain if they will qualify or be rejected for any new or renewals of their existing borrowing facilities.
The HS & Partners’ Stress Test closely follows the new test measures banks will be using. If our team foresees a problem renewing, then we will have time to recommend and assist in the implementation of solutions to prevent before you damage your relationship with your bank.
Banks will now want to understand the impact of the COVID-19 crisis on the company as well the overall strategic direction of the company before any renewal is approved. This includes assessing the company’s plan and ability on how to address the crisis, including but not limited to cash flow and liquidity considerations.
Our stress test will evaluate the key elements the banks will be measuring such as such as bank’s covenants, reporting, margining, security, and other aspects of credit structure. Our Stress Test will review:
- The impact of the economy and economic projections on your business
- Assess the operational impacts on sales, AR, collection cycle
- Impact on the company’s workforce
- Assessing Customer Risk
- Assessing impact on liquidity and Funding
- Assessing near term cash management challenges and total cashflow projections
- Assessing the company’s recovery plan and ability to execute the plan
After the Stress Test is completed and results discussed with business owner, if required, HS & Partners is able to offer the following additional assistance in ensuring the company will qualify for a renewal of their banking facility:
- Creation of a basic business plan and Cashflow projections. It is now important that you have a business plan moving forward. This financial plan will address your cashflow concerns and balance sheet obligations that COVID-19 has caused. Including structuring for any current and future loans you already have and may need to get, to secure your business’ future. This process would include:
- Creating a detailed business plan
- Projected monthly cash flow for the expected COVID-19 timeline (easily 12 to 24 months)
- Leaving room for flexibility for a variety of different scenarios, as everything is changing rapidly, and the phases of reopening can be backtracked at any time.
- If required, creating a template and procedures to track a weekly cashflow
A detailed business plan will also help speed up the application process as lenders will be dealing with a huge influx of applications due to COVID-19. Having a structured plan with flexibility will not only speed up the approval process but is also more likely to improve your chances of being approved.
- HS & Partners can assist in identifying COVID-19 and other general business support programs provided by the Federal and/or Provincial governments. There are now multiple government programs available to help those who have taken a hit due to COVID-19. We can help assess which programs you are eligible for and assist in the application process.
- If your current banking relationship cannot be sustained, then HS & Partners can assist in identifying other sources of financing.
Our team will be happy to discuss this program and answer any questions you may have. Please contact Louis at, lsapi@hsp-ca.com
