In the spring of 1982, as the recession cast a long shadow across the nation, the mounting troubles of a Detroit-area valve-and-fitting wholesaler made it a natural candidate for bankruptcy court. Although it had been a profitable, $5 million business before the economic slowdown, the 32-year-old, family-owned company had recently seen its orders from automobile-related customers shrink dramatically. Red ink was flowing out of control, the bank had called its loan, and dozens of suppliers were clamoring for payment.

Although the situation was deteriorating daily, a court-supervised bankruptcy reorganization was something the owners desperately wanted to avoid. Not only did the family view bankruptcy as a "cop-out," says the president, who is the founder's son, but there was also concern that "not many companies recover from Chapter 11." With the clock ticking, the wholesaler brought in a financial consulting firm to orchestrate an 11th-hour salvage mission. For four frantic weeks, the troubleshooter acted in behalf of his hemorrhaging client. He hammered out settlements at less than 50 cents on the dollar with more than 90 suppliers, obtained the critical cooperation of the nervous banker who had lent $600,000, and arranged a delinquent-tax payment schedule with the Internal Revenue Service.

Such measures, combined with deep internal cost-cutting -- also instituted by the consultant -- have enabled the Michigan valve-and-fitting company to begin a slow but steady climb from the brink of collapse. The consultant, says the company's chief executive officer, "restored credibility between the business and its creditors." And while it is family members, not employees, who are working the loading dock these days -- thanks to extensive layoffs -- the president says, "We feel very lucky to be in business."

In its effort to nurse teetering businesses back to health, Multi Financial Services Inc. of Birmingham, Mich., is accustomed to getting its own hands as dirty as those of its clients, most of whom are Michigan wholesalers or manufacturers with sales of $2 million to $20 million. Relying on a staff of 10 professionals, including veteran commercial lenders, accountants, and attorneys, Multi Financial's initial analysis of a company's problems might follow much the same line of any trained consultant or accountant, its principals concede. But diagnosing the illness is usually just the beginning of four to six months of intensive treatment, says Gregory R. Kelly, the firm's 35-year-old founder and president. "When you're dealing with companies that are bleeding," he says, "a survey won't solve very much. You really have to be ready to act."

In some instances, Kelly admits, chances of a comeback are so remote that the only viable option is aggressive liquidation; existing liabilities or obtaining the capital needed to upgrade facilities are simply too overwhelming. But when a judgment is made that a profitable recovery is achievable, Multi Financial draws on every technique it knows.

In addition to prescribing the steps clients should take to boost revenues and slash costs -- including the elimination of such perks as company cars -- Kelly and his associates lean heavily on their commercial-finance backgrounds as they chase down past-due receivables and represent company owners to testy suppliers and secured lenders. Sometimes, Multi Financial urges the sale of surplus assets as a way of raising money. Yet whenever possible, says Kelly, corporate rehabilitation is attempted without resorting to Chapter 11, for which the recovery rate for companies is only about 20%. Whereas credit settlements under supervision of bankruptcy courts are usually reached at a lot less than dollar for dollar, he says, "we try to convince banks and other creditors that they'll have a far better chance of getting their money back if they don't call the loan."

In about 70% of the cases, says, Kelly, banks and finance companies agree to cooperate with Multi Financial's clients instead of suing to collect on problem loans. And in some instances, lenders are even persuaded to extend additional credit. "They know how to talk to bankers in banker language," says a problem-loan specialist for a large Michigan bank, who has referred several customers to the firm. "We put a lot of trust in their analysis and in the proposals they put forward -- not because they're brilliant, but because they've been objective and reasonable."

Over the past couple of years, five-year-old Multi Financial has used its skills to rescue more than two dozen businesses from the brink of collapse. For its services to such clients, the firm typically charges monthly fees of $3,000 to $10,000, depending on the size of the company. Beyond its involvement in turnarounds, however, Multi Financial also intervenes for other companies whose problems, while serious, are less life-threatening.

Late last year, for instance, H.D. Edwards & Co., a $2 million Detroit distributor of industrial rubber, wire, and rope, which had posted a 1982 loss, was pressured to find a new lender when an Ohio-based finance company canceled its loan. The owners contacted Multi Financial's executive vice-president, Moerio Fossi, who used his nearly 30 years of commercial lending experience to negotiate a larger loan with a suburban Detroit bank at 1.5 to 2 percentage points over prime. The new interest rate was more than 2 points lower than the rate it had been paying. "If we had tried to find the money ourselves, it would have been very time-consuming." says vice-president Dan Potter. "Moerio knew exactly whom to approach."

Businesses on the upswing often experience difficulties as dangerous as those encountered by companies in need of dramatic turnarounds, notes Fossi. "They may be getting orders, but they are missing the working capital to produce them," he says. Last spring, for example, a $3 million metal fabricator was getting welcome new orders from machine-tool builders after being hit in 1982 by its first loss ever. When the company's bank refused to lend additional funds, because of the weakened collateral, Fossi approached several vendors with proposals for more flexible payment terms, much as he would have done for a client closer to the brink.

"We figure out a new payment schedule we can meet, and we try to use our credibility to convince suppliers to continue shipping," he says. "We explain that if our client doesn't have the credit, he'll simply lose the orders and become less able to pay what he owes." With no new money and with another few months of red ink looming, Fossi speculates that the metal fabricator, like other companies facing such a squeeze, will have no alternative but to declare bankruptcy. For the new credit it arranges, Multi Financial charges clients fees of 1% to 3% of the loan.

"Business owners usually wait far too long before facing up to their problems," notes Greg Kelly. Only after they have acknowledged their difficulties, he says, can the recovery begin. "We try to do everything we can to help companies avoid becoming statistics. But things tend to get a lot more complicated as the 12th hour approaches."