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How $50M+ businesses can structure rescue capital, private credit, ABL and balance sheet restructurings in the U.S. and Canada.
A company can have significant revenue, valuable assets and a viable underlying business while still facing a serious liquidity problem.
A major customer may pay late. An acquisition may underperform. A revolving facility may approach maturity. Covenant breaches can restrict availability. Short-term debt may consume too much cash. Suppliers may tighten terms at precisely the wrong time.
For businesses operating at $50 million and above, solving that problem usually requires more than another working-capital loan. The entire balance sheet may need to be restructured.
Quick Answer: Rescue capital can provide a $50M+ business with liquidity while management restructures debt, restores cash flow or completes a sale, refinancing or operational turnaround. The strongest transactions combine new capital with changes to existing obligations. If the underlying business cannot become cash-flow sustainable, however, additional financing may only postpone a deeper restructuring.
Rescue capital is financing provided to a company experiencing financial stress, a liquidity shortage, covenant pressure, an approaching maturity or another situation where conventional financing is difficult to obtain.
It is sometimes called special-situations financing, turnaround financing or restructuring capital.
The capital can take several forms:
The financing itself is only one part of the solution.
A genuine balance-sheet restructuring can also require maturity extensions, reduced amortization, covenant resets, creditor standstills, debt exchanges, asset sales, new equity or negotiated reductions in existing claims.
Mehmi's existing guide to equipment refinancing during a restructuring or turnaround addresses one asset-level solution. A $50M+ rescue transaction is broader: management has to determine how every major creditor, asset and liquidity requirement fits together.
The clearest warning sign is not simply that earnings have declined.
It is that the timing and amount of the company's contractual obligations no longer fit the cash the business can realistically generate.
Consider three very different situations.
A profitable manufacturer may have enough long-term enterprise value but face a temporary $20 million working-capital gap because inventory increased and customers slowed payments.
A leveraged acquisition may still generate positive EBITDA, but the combined company could have too much debt and too little covenant headroom.
A third business may be losing money every month because its underlying product economics no longer work.
All three companies have liquidity problems.
Only the first two may have a straightforward financing solution.
Rescue lenders therefore try to separate a temporary liquidity shortage from a structurally insolvent business model.
That distinction is critical. New money can buy time. It cannot create sustainable margins, repair customer demand or make an uneconomic operation profitable by itself.
For larger companies, the objective is normally to redesign the capital structure rather than simply add another loan on top.
That can involve several simultaneous changes.
A profitable company can still fail if too much principal falls due before it can refinance.
Moving a maturity out by two or three years can sometimes be more valuable than reducing the interest rate.
If a business needs cash to rebuild inventory, retain employees or repair operations, heavy principal amortization can undermine the turnaround.
Existing lenders may be asked to accept slower amortization in return for stronger collateral, additional reporting, an equity contribution or other protections.
A revolving credit facility should generally support fluctuating working capital rather than finance permanent losses or long-term assets indefinitely.
Mehmi's guide to business line of credit renewals explains why a revolver that has effectively become permanent debt may need to be converted into a more appropriate term structure.
A new-money provider might enter through first-lien debt, junior debt or preferred equity depending on the collateral and negotiations with incumbent creditors.
Mehmi's private credit guide provides additional background on how privately negotiated credit can differ from conventional bank financing.
Receivables, inventory, machinery or other assets may support dedicated financing instead of relying exclusively on enterprise-value debt.
That can include an asset-based facility, equipment refinancing or a sale-leaseback.
For companies with significant receivables and inventory, Mehmi's asset-based lending borrowing-base guide explains how eligible collateral, advance rates and reserves determine actual borrowing availability.
Rescue underwriting starts with a different question from normal growth financing.
Instead of asking primarily, "How successful has this business been?"
the lender is asking:
"What went wrong, how much money fixes it, and what specifically repays us?"
Expect detailed diligence on:
The 13-week cash-flow forecast is particularly important because an annual EBITDA number can hide an immediate liquidity problem.
A company can forecast $20 million of annual EBITDA and still be unable to make payroll next Friday.
Asset-based financing can be especially valuable when operating performance has weakened but collateral remains strong.
An ABL lender may focus more heavily on collectible receivables and saleable inventory than a conventional cash-flow lender.
Availability is normally based on eligible collateral rather than simply the stated facility limit.
A company with $80 million of receivables does not automatically have an $80 million borrowing base. Old invoices, foreign accounts, disputes, offsets and customer concentration can reduce eligibility substantially.
The same principle applies to inventory.
Mehmi's Canadian ABL borrowing-base guide goes deeper into those eligibility adjustments.
Factoring can provide another receivables-based liquidity option in the right circumstances. Mehmi's invoice factoring cost and approval guide explains why invoice quality, customer credit and payment timing matter more than simply looking at the company's headline revenue.
For a $50M+ restructuring, however, management needs to confirm that the new receivables facility is compatible with the incumbent lender's collateral rights.
Potentially.
Asset-heavy transportation, construction, manufacturing, mining, agriculture and distribution businesses can have significant capital trapped in machinery, fleets and other productive equipment.
The company may be able to refinance existing obligations or monetize owned assets through a sale-leaseback while continuing to use the equipment.
Mehmi's cash-out equipment refinancing guide and sale-leaseback cash-out guide explain these structures in more detail.
The credit issue is not simply fair market value.
A rescue lender or lessor will also consider existing liens, asset age, condition, useful life, marketability, required maintenance and how essential the equipment is to the turnaround.
Selling or heavily leveraging the assets that generate the company's cash flow can make the restructuring worse if the new payments are unsustainable.
Bridge financing works when there is genuinely something to bridge to.
For example, a company might need six months of liquidity before:
Mehmi's commercial bridge financing guide emphasizes the same principle: the exit is central to underwriting.
"We plan to refinance later" is not a credible rescue-capital exit.
A more defensible plan might identify the expected refinancing source, required leverage level, asset sale, committed investor or specific operating milestones required before the refinancing can occur.
A short-term loan attached to an uncertain exit can turn today's liquidity crisis into a larger maturity crisis.
A company does not have to enter a formal insolvency proceeding simply because it needs rescue capital.
Many restructurings are negotiated outside court through amendments, waivers, extensions, new-money financings, asset sales and equity injections.
When creditor actions, liquidity constraints or capital-structure conflicts make an out-of-court agreement impractical, formal proceedings may become relevant.
Chapter 11 generally allows a U.S. business to reorganize while remaining in possession and continuing operations, subject to the Bankruptcy Code and court oversight. A debtor in possession may also obtain new financing with court approval.
Section 364 permits different financing priorities. Under specified conditions, a court can authorize debt secured by a lien senior or equal to an existing lien when the debtor cannot otherwise obtain the credit and the existing secured creditor receives adequate protection.
Cash collateral is another major consideration. A Chapter 11 debtor generally cannot use cash collateral without the secured creditor's consent or court authorization with the creditor's interest adequately protected.
This is why debtor-in-possession financing, or DIP financing, is materially different from ordinary pre-filing rescue credit.
For qualifying Canadian corporations, the Companies' Creditors Arrangement Act is a federal restructuring regime. The Act applies where claims against the debtor company or affiliated debtor companies exceed CAD $5 million.
Section 11.2 permits a court to approve interim financing and grant security over company property. The court can also order that the financing charge rank ahead of an existing secured creditor's claim in appropriate circumstances. The interim-financing charge cannot secure obligations that existed before the order.
That is a specific court-supervised structure and should not be confused with an ordinary private bridge loan made before a CCAA filing.
Formal distress activity remains material in both countries. U.S. Courts reported 26,941 business bankruptcy filings during the 12 months ending June 30, 2026, up 16.9% from the prior 12-month period. In Canada, the Office of the Superintendent of Bankruptcy reported 22 CCAA proceedings during the second quarter of 2026.
Those figures describe formal insolvency filings, not the broader population of companies completing consensual out-of-court restructurings.
When financial pressure increases, the collateral map becomes critical.
In the United States, UCC Article 9 provides the general framework for security interests in much personal property. Filing is the general method of perfection, subject to important exceptions and special rules for certain assets.
Canadian common-law provinces generally use provincial PPSA regimes. Ontario's Personal Property Security Act, for example, provides for financing-statement registrations covering security interests.
Québec uses a different Civil Code framework and the RDPRM; the Québec government describes the register as identifying whether company assets and other property have been given as security or are affected by debt.
A rescue-capital provider therefore needs to know what collateral is already pledged and whether the existing creditor will subordinate, share collateral, permit a junior lien or be refinanced.
Having $40 million of equipment does not mean there is $40 million of collateral available for a new lender.
Consider an established Canadian manufacturer with approximately CAD $180 million of annual revenue.
The company still has a viable customer base, but margin compression and a failed expansion created severe liquidity pressure.
Assume its existing capital structure includes:
Under those assumptions, annual cash interest and required principal repayment total approximately CAD $26.65 million.
Management's forecast shows only CAD $20 million of annual cash available for debt service after operating requirements, working capital and necessary capital expenditures.
The existing structure therefore does not work.
Assume the restructuring introduces a CAD $50 million rescue facility with:
The company uses the proceeds to refinance the CAD $20 million short-term facility, cure critical supplier obligations, rebuild liquidity and pay restructuring-related costs.
At the same time, the existing senior lender agrees to reduce annual term-loan amortization from CAD $7 million to CAD $2 million.
Annual cash debt service would then be approximately:
CAD $4.4 million of senior interest + CAD $2 million senior amortization + CAD $2.25 million revolver interest + CAD $6 million rescue-loan cash interest = CAD $14.65 million.
That is a reduction of CAD $12 million per year from the assumed pre-restructuring structure.
With CAD $20 million of cash available for debt service, simple coverage improves from approximately 0.75x to 1.37x.
For Canadian transactions, Mehmi's DSCR calculator can help illustrate the relationship between operating income and scheduled debt payments. Its results are estimates, all calculator amounts are in CAD, and institutional rescue structures with PIK interest and bullet maturities require a more detailed model.
The restructuring has not eliminated the company's problem.
The 3% PIK component increases the CAD $50 million rescue principal to approximately CAD $54.64 million after three years.
The rescue facility therefore creates a significant future refinancing obligation.
Under the assumptions above, three years of cash interest equal CAD $18 million, the 2% upfront fee equals CAD $1 million, and repayment of the accumulated principal would require approximately CAD $54.64 million. That is approximately CAD $73.64 million of total cash outflow associated with the facility over the three-year period, excluding legal fees, advisory expenses and other transaction costs.
The transaction only succeeds if the company uses the additional runway to improve operations and create a credible exit for that CAD $54.64 million maturity.
This is why rescue financing should buy time to fix the balance sheet, not simply time before the next default.
The strongest submission acknowledges the problem rather than attempting to hide it.
Management should be able to explain:
A lender will generally have far more confidence in management that says, "We lost $6 million because these three contracts became unprofitable, we have exited two of them and repriced the third," than management that describes the same decline simply as "temporary market conditions."
Transparency is part of the credit.
Rescue financing may be inappropriate when the financing only extends an unsustainable business model.
Examples include situations where:
In those cases, an equity recapitalization, asset sale, strategic transaction or formal restructuring may provide a more durable solution.
Debt forgiveness itself can also create tax consequences. In the United States, cancellation-of-debt rules include specific bankruptcy and insolvency provisions and can require reductions in tax attributes. Canada's Income Tax Act contains separate commercial debt-forgiveness rules that can reduce tax attributes and, depending on the circumstances, create an income inclusion.
Those consequences should be modeled by qualified U.S. or Canadian tax advisers before a restructuring is finalized.
No. Rescue capital can be provided outside a formal insolvency process. DIP financing in the United States and court-approved interim financing in a Canadian CCAA proceeding operate under specific statutory and court-supervised frameworks.
Yes. Profitability and liquidity are different. A profitable business can face a cash crisis because of a debt maturity, covenant breach, delayed receivables, acquisition problem, inventory build or another timing mismatch.
Possibly, but not automatically. The parties may need a refinancing, subordination agreement, intercreditor arrangement, junior-lien structure or other negotiated solution. Existing credit documents must be reviewed.
It depends on the transaction. A new equity contribution can improve alignment and provide additional liquidity, but there is no universal requirement applicable to every rescue-capital transaction.
Potentially, depending on the facility, lien position and restructuring plan. Tax claims and statutory priorities require jurisdiction-specific legal analysis, and a lender will normally want a detailed use-of-funds schedule rather than a general working-capital request.
PIK can preserve near-term cash because the interest is added to the obligation instead of being paid currently. The trade-off is a larger future payoff. It is useful only when the additional liquidity helps produce enough enterprise value or cash flow to address that later obligation.
There is no responsible universal timeline. Timing depends on financial reporting, collateral diligence, creditor negotiations, legal documentation, appraisals, court involvement where applicable and the complexity of the capital structure. An incomplete lien or liquidity picture can materially delay a transaction.
A distressed company should determine its true liquidity requirement before approaching the market.
That means building the 13-week cash forecast, mapping existing debt and liens, identifying the minimum capital required to stabilize operations and defining how the new financing will eventually be repaid.
Mehmi Financial Group operates as a financing brokerage/intermediary, not as the direct lender controlling underwriting. For institutional-scale and special-situations transactions, Mehmi can review the financing objective and determine whether it fits its current financing network or whether a specialist institutional capital path is required.
When reaching out, provide the financing amount, United States or Canada, state or province, use of funds and required timing. For a $50M+ restructuring, also include recent financial statements, a debt schedule, current liquidity, major collateral and a short explanation of what created the financing need.
Call 833-863-4644 or contact Mehmi Financial Group.
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