How We Partner with Management to Solve Liquidity Shortfalls
When companies face liquidity challenges, the pressure can come from all sides; Vendors need assurance, Lenders demand visibility and collateral, and Customer expectations cannot be ignored. Our role is to partner with management to stabilize operations, protect relationships, and build a path to stronger financial health.
Case #1
Situation
We had been helping a Company improve through a series of operational initiatives, and after 6 months of implementation work, it was now generating enough cash to pay off long-term debt. However, as part of the turnaround, accounts payable had been deferred, leaving key obligations behind. Major customers, who were also creditors, began demanding immediate repayment. A critical raw material vendor required an immediate paydown or threatened to halt service. On top of that, another key vendor notified the Company of an unpaid balance that had been billed incorrectly in the past but was now due and accruing significant interest.
Solution
Silverman worked side by side with management to develop a plan addressing each critical stakeholder according to the company’s best interests. This included:
Proactively planning to mitigate risks that could be solved with additional capital
Seeking equity support to improve both cash flow and operating performance
Prioritizing paydowns to protect operational continuity
The plan allowed the company to stabilize vendor relationships, satisfy creditor demands, and continue generating cash, all while laying the groundwork for ongoing operational improvements.
Takeaway
Even companies operating in a cash surplus can face urgent liquidity challenges. Given the Company has equity value, a timely capital infusion can help super-charge the situation allowing management to solve problems before they escalate. This is further amplified when you consider that an improvement of over $1 million in recurring operational efficiencies translates to a considerable increase in equity value based on industry multiples.
Case #2
Situation
Before being introduced, our Client ran out of cash entirely after a prolonged series of strategic missteps caused customers and employees to flee quickly. The missteps caused significant operating cash losses, forcing the Company to stretch payments to critical vendors, as all other liquidity resources were already maxed out. After months of payment delays, the Company could no longer defer payments to key vendors and began to experience the loss of essential services and equipment. The resulting disruption led to the loss of critical relationships and significantly increased operating costs due to the loss of preferential pricing.
Solution
Silverman partnered with Management to identify and execute on the most urgent priorities:
Negotiate a line of credit extension with the bank to secure adequate short-term liquidity
Restructure payment schedules with key vendors to preserve critical relationships
Explore alternatives for competitive pricing and performance improvements
Develop an immediate plan to reach the net cash flow break-even
By combining financial planning, vendor negotiation, and operational adjustments, the Company is on a path to regain control of cash flow and stabilize its business.
Takeaway
In periods of tight liquidity, prioritizing critical vendors and carefully allocating cash is essential. Management should quantify what each dollar accomplishes before making payments and explore all alternatives. Communicate clearly and factually with your vendor base and adhere to payment schedules to build credibility. Quickly identify and execute on near-term improvements to improve cash flow from operations, while also pursuing financing and/or capital alternatives to enhance your liquidity position further.
Our Approach
Our team combines expertise in Capital Sourcing, Liquidity Management, and Operational Improvement to deliver solutions that create measurable value. We help companies:
Develop practical cash planning strategies
Identify and implement profit and performance improvement initiatives
Execute restructuring solutions to preserve relationships and operations
Align stakeholders to protect and enhance company value
No matter the size or severity of the liquidity challenge, we work alongside management to stabilize operations, safeguard critical relationships, and unlock long-term growth potential.