Our client reached out to us after reading about our case studies – 2 years ago they’d been working for one customer.
With a change of management in that customer they saw their rates come under cost pressure and continuous price cuts left them performing work at a loss.
The directors could see a change of direction was required and began building a deeper customer list.
As business was turning around they changed invoice finance providers to a lender who has a poor reputation.
With their concentration limits and funding levels reduced without notice and their account manager not returning calls they found their cash flow choked and they missed a few repayments with a number of their equipment finance providers.
Their position became critical as one lender began wind up proceedings to recover their equipment finance and a number of others piled in.
At this point a private lender offered invoice finance and to pay out some of the equipment finance providers but this was only meant to be a temporary solution.
Another private lender came in to payout other equipment finance providers but the business owners realised the terms were so extreme they would go out of business if they went ahead with this lending.
At this point they reached out to us with 6 lenders having lodged caveats over 3 properties and the temporary lender wishing to be paid out immediately.
We contacted the largest of the equipment finance providers and they acknowledged they were on the cusp of appointing administrators.
Being well known to the lender we explained we could see a solution that had their debt paid out in full if they allowed us the time to execute that solution.
We went through the process of contacting all the lenders and advising our plan – most lenders were happy to continue with the business if their arrears were caught up and the wind up actions were dealt with.
Many business owners will be familiar with a capital raise against equipment but this wasn’t possible in this customer’s circumstances.
Instead we utilised a large rent to own provider to conduct a sale and rent back.
This had 2 advantages.
Firstly it was viable, as the credit process for rent to own is easier to pass than equipment finance and we were able to give the funder confidence the business could trade out of their position.
Secondly, the sale was completed on a market value basis vs an auction value of assets as equipment finance providers would have done.
This allows for a larger cap raise.
The client was rapped and a second cap raise is underway to payout the remaining position and invoice finance.
It was a great bit of work to facilitate and we’re very happy the business will continue with all staff keeping their jobs and no homes lost.
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