As a result of the current global pandemic, all businesses will have their production and cash flow negatively impacted. As has been the case in every past recession or major market correction, the key to financial balance and profitability may now be achieved through a reduction in operating expenses as well as finding creative ways to secure new capital. For businesses that own their real estate, one effective way to raise capital is through a sale/leaseback structure which is a financial transaction whereby a company enters into a long-term lease and then sells the property to an investor. These are highly sought after investments and are particularly attractive during economic downturns. In addition, companies that lease space and may need rent relief may have an opportunity to restructure their leases at a lower cost basis. Clearly some businesses will be more adversely affected than others, but for those companies that, despite having near term cash flow issues, are fundamentally sound businesses, there are definitely ways to improve the balance sheet.
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