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Thread: recapitalise without issuing more shares

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    recapitalise without issuing more shares

    is this possible?

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    Diamond Member Blurock's Avatar
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    Quote Originally Posted by Bizfact View Post
    is this possible?
    Unable to assist as you have not completed your profile or stated your profession.

    What business or industry are you in? How does your supply chain work? Have you maximised opportunities...
    Excellence is not a skill; its an attitude...

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    Site Caretaker Dave A's Avatar
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    Other than receiving donations (which would normally only occur under not-for-profit circumstances) issuing shares is the only way I can think of off the top of my head to recapitalise without incurring a liability on the balance sheet that involves money changing hands and without dragging assets into the mix.

    If you've got an asset that has appreciated, selling it or revaluing it and raising additional finance against it could raise the capital base.
    The trouble with opportunity is it normally comes dressed up as work.

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    help

    Thank you for your replies. About my profile, I am having trouble editing it. I am accessing TFSA through a webbox... Must I access it using a computer in order to edit my profile?

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    recapitalise

    So in the case of incurring a liabilty on the balance sheet, is it possible to set one's own interest rate?

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    Diamond Member Blurock's Avatar
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    By wanting to recapitalise it appears as if cash flow may be a problem in the business?

    There may be cash tied up in the business and by unlocking these assets, cash will be released that can be applied elsewhere. This is an old strategy that is used by many a (new) CEO or turnaround specialist to make a balance sheet look better and to increase share value. They can then claim to be financial wizards and reap the awards and bonuses that go with it.

    Sources of cash in a business:
    1. Debtors - cash can be tied up in extended terms to debtors. This is money that has essentially been "lent" to customers to enable them to buy from you. Get them to pay on shorter terms and offer settlement discounts to accelerate cash flow.You may also consider discounting your debtors book. E.g. your debtors owe you R1million. A bank or factoring house may allow you to draw up to 80% of approved debtors = R800,000. This money is available to pay creditors. You may even be able to claim a settlement discount or cash discount from the creditor (supplier) to offset the factoring or discounting fee.

    2. Stock - Find your optimum stock level. How much stock (inventory) do you need to trade? What are your lead times to replenish stock? What is the nature of your stock? Does it go out of fashion and become redundant or is it perishable? Often we carry too much stock which just lies on the shelf to gather dust. This is MONEY lying there. The faster you sell, the faster you get profit coming in. Reduce the thousands of Rand tied up in stock and you'll be surprised how much money is left in the account.

    3. Sweat your assets - do you have un(der)performing assets which have a high value, but is not generating revenue? Often we see balance sheets with properties or other assets which have been devalued to virtually zero. By selling these properties or assets, you realise the real value of the asset and generate cash into the business.

    Maria Ramos famously did this at Transnet and made the balance sheet look so much better. E.g. a property was purchased for R100,000 in say 1950. Over the years the value has increased with inflation and the upward trend in property values. On the balance sheet the value is still shown at the original cost price (an accounting principle). In say 2012 the property is sold for R1 million and a "profit" of R900,000 is shown. The profit is reflected on the balance sheet and the CEO is rewarded for doing a "good" job.

    4. Creditors - Make use of available terms from creditors. This is usually interest free money and can give you an additional 30 - 60 days to pay. Should you not be able to negotiate sufficient terms from creditors, try to get a cash discount to offset other finance costs. (Be mindful of paying creditors on time as late payments may come back to bite you in the long run).

    5. Consignment stock - Negotiate with suppliers to give you consignment stock which you only need to pay for when its sold. This option is not often available, but is a good way of working on a low budget where possible.

    There may be other ways of finding cash in your business, but without details about the nature of your business or the industry that you are in, we can only comment on the basic principles.
    Excellence is not a skill; its an attitude...

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    What I do

    I build teams Blurock, teams with a purpose of assisting their members in building businesses. I developed a model for the operation of these teams. This model is called The Business Factory Model. We implement it through The Business Factory Programme. The programme allows the entrepreneur to:
    1) capitalise and recapitalise without losing ownership
    2) have a support system in place while creating the business(es),
    3) have continuous access to business funding
    4) be part of the body that decides on the issuing of the loan and that sets the interest on his/ her loan
    5) have the interest (or part thereof) ploughed back into his/ her pocket at the end of the programme.

    I created this Model because I experienced the difficulty of securing finance a young entrepreneur faces if s/he has a brilliant idea but no collateral
    That is my line of business. I am still having difficulties with editing my profile using my webbox.

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