An electrical and data contractor came to us looking to raise working capital to cash flow their upcoming jobs.
With an overdraft and existing term loan already they were looking for a solution that was easy on cash flow. We refinanced their existing term loan and provided them $95k of new lending all over a 5 year term.
Unlike other unsecured lenders, this solution is the longest term offering in the market outside of the banks. An added benefit is their early payout treatment, as the lender forgives future interest
This means our client had lower repayments and gets the benefit of discounted interest when they payout early. This a great alternative to expensive progress claims finance or if you don’t want to be locked into a contract from an invoice finance provider.
Why This Unsecured Term Loan Was the Right Solution
When it comes to financing for businesses like electrical and data contractors, cash flow management is critical. The client’s existing financial obligations, combined with the need for additional working capital, required a solution that provided both flexibility and affordability. This $250k unsecured term loan offered several distinct advantages over traditional financing options, making it an ideal choice for the client.
Flexibility with Long-Term Repayment Options
One of the standout features of this loan is its five-year term, which is notably longer than what is typically available from unsecured lenders in the market. This extended term significantly reduces the strain on monthly cash flow, allowing the client to manage their finances more effectively without the pressure of large, frequent repayments. By spreading the repayments over a longer period, the business can focus on growth and operational efficiency, rather than being burdened by financial obligations.
Lower Cost of Borrowing with Early Payout Benefits
Unlike many other financing options, this loan offers a unique early payout feature where the lender forgives future interest if the loan is paid off early. This not only incentivizes early repayment but also provides substantial cost savings to the client. By reducing the total interest paid over the life of the loan, the client can redirect those savings into other areas of the business, such as purchasing new equipment, hiring additional staff, or expanding into new markets.
A Strategic Alternative to Progress Claims Finance
Progress claims finance is often used in industries like construction and contracting, where payments are received incrementally as work progresses. However, these financing options can be expensive and may tie the business to rigid repayment schedules that don’t align with the actual cash flow. The $250k unsecured term loan provides a more flexible and cost-effective alternative, allowing the business to access the necessary funds upfront without being locked into the restrictive terms often associated with progress claims finance.
Avoiding the Pitfalls of Invoice Finance Contracts
Invoice finance is another common option for businesses looking to bridge cash flow gaps, but it comes with its own set of challenges. Invoice finance agreements can be complex and often require businesses to commit to ongoing contracts, which may not always be in the best interest of the client. In contrast, the unsecured term loan offers a straightforward, one-time financing solution without the need for ongoing commitments. This allows the business to maintain control over its finances and avoid the potential downsides of long-term invoice finance contracts.
Enhanced Cash Flow for Upcoming Projects
The primary goal of this loan was to provide the working capital needed to cash flow upcoming jobs. With the funds secured, the business can confidently take on new projects, knowing that they have the financial backing to support their operations. This level of financial security not only empowers the business to grow but also positions them as a reliable contractor in the eyes of their clients, leading to more opportunities and potential for future contracts.
Conclusion
This case study highlights the importance of selecting the right financial solution tailored to the specific needs of the business. The $250k unsecured term loan provided the perfect balance of flexibility, affordability, and strategic benefits, enabling the electrical and data contractor to manage their debt, secure additional funds, and maintain healthy cash flow.
