Given the cyclical nature of the metals industry, a strong balance sheet, ample liquidity and the ability to react quickly may be the surest insurance for success and survival. Supply and demand considerations and commodity price volatility, coupled with the continuous quest to lower costs and improve key measures of performance, provide a perfect breeding ground for success — or failure. But with the uncertainty caused by today’s events, businesses need to look at market forces and internal drivers of performance as the means to best manage their businesses.
Position your business for success
The metals industry was already facing challenges before the worldwide pandemic; for many companies, it only exacerbated existing issues. Positioning for success and survival takes planning, as well as the ability to quickly respond to real-time events. One of the keys to long-term success is having the appropriate capital structure in place — this helps companies take advantage of opportunities and survive during challenging times in the industry. A strong balance sheet, with low to moderate leverage, adequate liquidity, good working capital management and excellent operating performance metrics are hallmarks of this.
Benchmark your performance
Competitive benchmarking, which involves comparing a number of metrics for your company to its peers, enables a company to see how it is doing, including areas where it is doing well and areas for improvement. Two key considerations are who you want to be benchmarked against, and obtaining the benchmarking information. Benchmarking against public companies can be insightful. But for some it may not be a relevant comparison, or the larger company might be in other markets or lines-of-business, making a comparison difficult. We find that the most successful businesses benchmark against their competition to identify their opportunities for advantage.
To determine how well your company compares to its competitors, Bank of America developed PeerProfiler™, a database of information aggregated from thousands of companies, based on our worldwide clientele. Discussing PeerProfiler™ results with us can reveal opportunities to focus on key elements of your capital structure, including working capital management, operating efficiency and debt capacity to support organic growth or strategic acquisition. These discussions are essential to maintaining and growing a viable business.
PeerProfiler™ goes beyond financing or capital-raising strategies, showing treasury and other solutions that can be developed to reduce costs and create new working capital strategies. It includes a sensitivity analytics model that shows financial impacts from changes in payables, receivables and inventory. All PeerProfiler™ attributes can help businesses better anticipate change and plan accordingly to minimize turbulence and maximize results.
Find the right financing structure
For many companies in the metals industry, an Asset-Based Loan (ABL) is the preferred financing structure for a senior credit facility because of its covenant-lite nature, flexibility and attractive cost of capital. ABLs can provide working capital financing for acquisitions and investments, turnaround or debtor-in-possession financing, and help recapitalize businesses, including the establishment of Employee Stock Ownership Plans (ESOPs).
Operate in ways that are fast, smart and secure
Digital transformation and making it easier for our clients to do business with us are key areas of focus for Bank of America. We offer a full suite of digital tools that provide speed, accuracy and real-time data on key financial information. Our CashPro™ solution is a secure method for signing treasury, trade and deposit documentation. Likewise, Intelligent Receivables uses artificial intelligence to reconcile receipts, while Accounts Payable Optimization uses data analytics to enhance working capital. Additionally, Application Programming Interfaces (APIs) present data from multiple sources in a single place, providing a clear and concise view of financial fundamentals from multiple sources and conforming to the “open banking” standards instituted by many countries.
Although as humans we value personal relationships and connections, we can also expedite many business transactions by using digital tools that provide speed while minimizing errors. The opportunities of today may become the challenges of tomorrow, and the speed of necessary transactions can help protect your business as conditions deteriorate, or enhance it as the market rebounds.
Contact one of our bankers today, or visit our website at bofaml.com/business capital for more information.
National Industry Executive
Bank of America Business Capital