Whether you are a Financial Controller or a Treasurer of an organization, it is imperative that we should always capitalize on the strong financial strength or present financial performance to get rid of encumbrances/burdensome covenants or personal guarantee given earlier by your top management.
Sound simple and basic! Well, this is a gentle reminder.

In the past, your organization initializing might be struggling to made ends meet. You borrowed externally by pledging your company’s assets at very unfavorable terms and worst still, your financiers/ bankers would coerce your shareholders/directors to sign off personal guarantees. As years passed, your company has gain sound financial performance and reputation. Gearing has reduced dramatically but you are still having your assets pledged unfavorably and personal guarantees clauses have not been taken away.
Eureka! Now then is the time to review:

• All unfavorable banking covenants;

• Re-convert high interest payable banking instruments to cheaper type;

• Re-look into other means rather than asset collaterization/pledging;

• Discharge any personal guarantees given in the past and

• Negotiate for cheaper interest rates for bank overdrafts,etc

• Do not allow one bank to take all, practice parri passu basis re: equal terms to all bankers and the worst only give a negative pledge and

• Last but not least anything that you can think of to safeguard your organization’s risk exposure.

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