Summary of the solution:
- $2.4M private first mortgage @ 7.89% with a 30 year term
- $400K capital raise against factory assets
- $800K invoice finance limit to raise capital and bring cash recognition forward.
Manufacturing businesses that rely on international supply lines functioning efficiently experienced a double whammy during Covid.
Especially those in Melbourne that dealt with prolonged and repeated shutdowns that put a halt to operations and sales again and again over an extended period.
Some of these businesses are only now unpacking their problems while many other had fallen by the wayside.
This client was referred to us by an advisory firm who was guiding the client through a restructure.
At the heart of the lending challenge that had stumped multiple brokers before us was a refinance of a business loan from a lender who held a mortgage on the family home and a PPSR over the trading business.
The clown who arranged this had also persuaded the client to have their elderly in-laws guarantee the loan.
The stress at the idea they too could lose their home had greatly impacted the business owner.
Complicating matters, the ATO issued a default on their outstanding debt as we were appointed and because of this the client’s equipment and unsecured loan providers registered caveats over the property.
This meant these loans also needed to be paid out to exit the legacy loan and deal with the considerable ATO debt still leftover from COVID.
While the client had been servicing their existing loans and ATO obligations they’d been unable to make a dent in the significant outstanding tax debt and penalties that were occurred during the extended Melbourne lockdowns at the accelerated rate the tax office was pursuing.
The business restructure and refinance of the debt allowed for a manageable way forward, preserved jobs and positioned the business to continue in a sustainable way.
After securing a first mortgage private loan with a 30 year term we negotiated a reduced payout with the business owner’s equipment finance provider and arranged a capital raise secured by the equipment to deal with the caveat the legacy equipment finance provider had lodged.
An $800K invoice finance facility was established to raise the small shortfall that was leftover to exit the remaining legacy debt and this also brings the cash recognition for the business forward.
The relief in the business owner and his family was clearly noticeable as they began to realise the solution was going to come together.
They reported record sales and orders in the month of June and instead of a liquidation, and a family (including elderly in laws) losing homes and a number of employees needing to find new jobs the business will be able to continue a contribution in a sustainable way.
