What Is Capital Restructuring?

Capital restructuring is a type of business operational strategy that is employed to make changes to the capital structure of a company, usually as a way to deal with shifts in the marketplace that have impacted the financial stability of the business. This same approach may also be used to rearrange capital assets in order to position the business so that company owners can take advantage of a growth opportunity. Essentially, this type of process seeks to make changes to company finances and holdings so that the business is able to operate more efficiently and move toward its stated goals.

One way to think of capital restructuring is to compare the process to making changes around the home. Just as repurposing the use of some rooms, adding enhancements or improvements, or even engaging in some remodeling of the actual house can add value and make the real estate more appealing, a restructuring of capital can also help to enhance the function of a business and also make it more appealing to potential investors. At the same time, wise restructuring may also enhance the reputation of the company in the marketplace, prompting more consumers to purchase goods and services from the business.

There is no single process for engaging in capital restructuring. Typically, company owners and managers will perceive a need to make some changes in order to improve the overall prospects of the company. At times, the effort is triggered by a change in the economy, such as the onset of a recession. In this scenario, the restructuring may focus on protecting the core business and keeping it intact during the economic downturn, possibly by using certain capital assets to offset operating expenses in the interim. The restructuring may also come about due to positive events in the economy that create growth opportunities for the business, prompting owners to rearrange assets in order to take advantage of those possibilities and increase both the reputation and the bottom line of the business.

When considering a capital restructuring, it is important to assess the current capital structure and understand if and why there is a need to change anything. Identifying the reasons for the change will often make it easier to determine what changes should be made in order to generate the most benefits. Like most business processes, restructuring requires attention to detail, the ability to understand and project market movements, and how to make the best possible use of that information. When successful, a capital restructuring can support a company through a slow period, position the company for growth, and even help maintain productivity under what would otherwise be extremely trying circumstances.