We were approached by an advisor to a chain of children’s nurseries based along the South coast. They wanted to raise a deposit for the purchase of another property and carry out some improvements to the existing business units.
The Finance Challenge
The business was established and trading well. The challenge was that because the business had facilities in place with their existing bankers, the level of security they could offer to the bank could not be increased as everything was already committed. Because of this their bank had advised that they could not lend any more than they already had.
What this meant was that any new borrowing had to meet the following criteria;
- Not affect the existing bank facilities or breach the loan covenants that had been agreed
- Be available without the business or its directors having to commit their assets
The business had already approached another lender but had not managed to obtain what they wanted. The accounts for the business were good, the proposed loan was affordable and the purpose made complete sense.
What we did in this case meant going further than other standard commercial finance brokers. With this in mind we;
- Took the existing loan agreements and understood the covenants and conditions
- Worked with the customer’s accountant to obtain up to date financial accounts
- Calculated the new loan repayments, interest and capital costs. Took this and measured against the covenants their bankers had put in place
Once we were happy that our proposed solution would not cause the client any issues when their bank renewed their facilities, we took things forward and presented the client with a loan offer of:
- £200,000 loan over a 5 year period
- No fees taken off the loan
- A fixed interest rate of 8.7% with no early repayment charges after 6 months
- No tangible security to be provided by the business or directors
The Final Thing
The other part to add to this is that we completed this process and presented the client with their approved loan offer within 72 hours, with 9 days the client had the cash in their account. Not bad when the first thing the client says to you is ‘I don’t think this is possible, but…’
Business Finance Options
If there is a moral here it is that you may often think that finance is not possible, you may have been declined by your business bank or been told by your commercial finance broker that they cannot do what you want.
The fact is, that if you look at business finance with a more holistic eye, apply real world knowledge and experience then often things can be achieved.