Elvio Trovini on Financing in a Crisis: How to Build Flexible and Resilient Deals
Businesses must enter survival mode when interest rates increase and credit becomes restricted and global economic shocks occur. The volatility in the market causes small business owners and property developers to lose their solid-looking deals which they previously considered secure. Experienced financiers maintain that businesses should not face such difficulties. The foundation of successful deal-making requires developers to include built-in resilience during the initial planning stage.
The natural occurrence of market cycles remains unavoidable in business operations. The success of your financing structure depends on its ability to adapt to market changes without collapsing according to Elvio Trovini who has worked on hundreds of real estate and commercial lending and accounts receivable financing deals.
The implementation of flexible financing solutions which can handle crises requires specific characteristics. Several essential principles guide experts when creating flexible financing solutions.
- Build in Rate Flexibility
The recent two-year period has shown how fast interest rates can change which makes fixed-rate agreements dangerous for borrowers because they create unfavorable financial situations. Floating-rate debt without proper safeguards leaves borrowers vulnerable to uncontrolled expense growth.
Trovini suggests businesses should use hybrid financial structures for their deals. Businesses should combine short-term fixed-rate segments with floating-rate segments while implementing rate cap agreements to prevent extreme exposure. The combination of fixed and floating rate segments in a deal structure enables businesses to handle rate increases without losing their long-term financial stability.
- Protect Liquidity Through Covenants
The protection of cash flow stands as the most important factor during economic stress periods. Businesses that lose their liquidity through demanding repayment terms and strict financial conditions will experience financial distress.
Borrowers need to request performance-based triggers instead of traditional covenants to maintain their financial stability. The economy’s downturn should not result in penalties for borrowers according to Trovini. Businesses that link their repayment terms to revenue performance and occupancy metrics gain flexibility during economic challenges while maintaining lender confidence in their financial responsibility.
- Diversify Sources of Capital
The combination of conventional and non-traditional funding methods creates resilient financial agreements. Businesses can access cash from unpaid invoices through accounts receivable financing while private credit and mezzanine funding and bank loans provide additional financial support.
The distribution of risk becomes more effective through this diverse funding method. The risk of one lender withdrawing from the market becomes manageable because other lenders can enter to provide funding. The construction loan market has seen developers use bridge financing to sustain their projects when capital markets experience instability.
- Keep Relationships at the Center
The foundation of resiliency consists of both financial arrangements and personal connections between parties. The strength of enduring relationships between lenders and investors and advisors becomes essential during economic turbulence because it determines whether a business can avoid default or must extend its covenant.
Trovini emphasizes that trust functions as a vital form of capital. Your business partners will maintain their support during challenging times when you have established trust through multiple years of operation.
- Align Financing with Purpose
The most enduring financial agreements unite funding to both financial targets and business growth strategies. Businesses that demonstrate how their funding supports sustainable development and community enhancement and innovative progress tend to obtain adaptable financing terms.
A Playbook for the Next Cycle
Business owners and developers who face the uncertain 2025 period should understand that building resilience requires deliberate planning. The combination of hybrid interest rates and liquidity protection and multiple funding sources and solid business relationships and purposeful financial narratives creates financing solutions that can survive economic challenges.
According to Trovini the key to long-term success lies in creating financial structures which enable continuous operation regardless of market fluctuations.