Case Study: $40,000 Asset Backed Bridging Loan (no financials or bank assessment or property security needed)

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Our client came to us needing an urgent funding solution until they recognised several hundred thousand dollars.

With cash flow in short supply until their funds were paid, they needed a solution with capitalised interest that could be paid out at the end of the term.

While private lending solutions usually fit this description, they’re not viable to fund such a small amount as the cost of valuations and other fees means they’re generally unsuitable for loans under $250,000.

A new private lender providing funding secured by an asset of value was the perfect fit as our client had vehicles they didn’t need on the road during the term of the loan.

The lender literally describes their solution as “like a cash convertors for business.”

This is definitely not a loan for everyone but can be a solid solution in the event you need bridging finance or have an opportunity to secure when other lending solutions aren’t available to you.

Features and Benefits of the $40,000 Asset-Backed Bridging Loan

One of the key features of this loan is the flexibility in its security structure. Unlike traditional bank loans that require stringent credit checks, financial statements, and often property as collateral, this loan was secured by business assets, specifically vehicles. For businesses that are asset-rich but temporarily cash-flow poor, this form of financing can unlock much-needed liquidity without the long wait times associated with more conventional lending processes.

No Financials or Bank Assessment Needed

A standout feature of this loan is that the borrower did not need to provide detailed financial records or undergo a bank assessment. Many businesses, particularly those that are scaling or dealing with temporary cash flow shortages, often struggle to meet the high documentation demands required by traditional lenders. This can significantly delay the funding process, which is not an option when quick access to cash is critical. With this loan, the streamlined approval process meant that the client could secure the funds urgently without the typical barriers that banks often impose.

Capitalised Interest – Paid Out at the End of the Term

Another key benefit is the structure of the loan’s repayment. The capitalised interest feature allows borrowers to avoid making regular interest payments during the loan term, which can further strain cash flow. Instead, the interest is rolled up and payable at the end of the loan term. This provides breathing room for the borrower, who expects a large influx of funds to cover the total repayment once the loan matures.

A Good Fit for Bridging Finance

Bridging finance, in its essence, is designed to cover short-term financial gaps, making it an ideal solution for businesses in need of urgent liquidity to carry them over until they can secure a more permanent source of funding. In this case, the client had significant funds due to them, but these were not accessible immediately. The bridging loan gave them the flexibility to continue operating without disruption, with the peace of mind that they could pay off the loan once their larger funds came through.

Suitability for Smaller Loan Amounts

Typically, private lending is better suited for larger loan amounts due to the costs associated with valuations and other fees. However, in this case, the lender’s unique approach to securing the loan with any asset of value made it viable for a smaller loan amount of $40,000. This flexibility is rare in the private lending space, making this lender stand out for clients who need quick funding for relatively small amounts but do not wish to incur the high costs associated with larger valuations or more extensive due diligence.

Flexibility in Asset Security

The client’s ability to use vehicles they didn’t need on the road during the loan term demonstrates the flexibility of the lender’s requirements. Unlike traditional loans that may require property or significant business assets to secure the loan, this asset-backed loan opens up opportunities for businesses to tap into non-essential or idle assets. This feature can be crucial for businesses with fluctuating operational demands, such as logistics or transport companies that may have periods where their fleet is underutilised.

No Property Security Needed

For many business owners, offering property as security for a loan can be risky and undesirable, especially if they are already leveraging their real estate assets for other commitments. The asset-backed nature of this loan avoids the need for property security, allowing business owners to retain control of their real estate while still accessing funds. This is particularly beneficial for businesses that are in the growth phase and may need to reserve their property equity for future expansion plans or larger financing needs.

Conclusion

While not suitable for all borrowers, this $40,000 asset-backed bridging loan provides a niche solution for businesses needing short-term liquidity without the hassle of property security, financial assessments, or ongoing interest payments. It offers an innovative way for businesses to leverage assets they may not currently need, giving them the flexibility to maintain cash flow and operations until larger funds become available. By providing an option that is both fast and flexible, this loan serves as a valuable tool for business owners in need of urgent, short-term financing.

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Case Studies

Case Study: $1.1M Private Loan to a Commercial Construction Business

Prior to COVID, our client had a thriving commercial plumbing business. Like many in the industry, the pandemic hit hard, with reduced contracts and delayed payments leading to financial strain. However, as the market picked up again post-COVID, their numbers began improving steadily. Still, the burden of the pandemic remained in the form of costly, self-sourced loans that created a significant drain on their cash flow. On top of this, the business had accumulated $1M in tax debt. The client was faced with two potential solutions: consolidate their existing debts into a more manageable loan or consider restructuring the business entirely. With the future looking brighter for their business, consolidation became the preferred choice. Their turnover and cash flow were strong enough to support a $1.1M unsecured loan over five years. However, while loans of up to $250,000 can sometimes be obtained without the need for extensive documentation, larger loans – particularly unsecured ones – typically require financials. The company’s financials had taken a hit during the pandemic, and with losses on the books, the unsecured option was off the table. The Tailored Solution: Secured Loan with Capitalised Interest Recognising these challenges, we adopted a two-step approach to provide the client with the financial relief they needed. First, we secured a $1.1M first mortgage loan, backed by property as collateral. By securing the loan against property, we were able to access a more flexible and favourable lending option that allowed the business to maintain liquidity. One of the key features of this solution was the decision to capitalise the interest on the loan. This strategy meant that the interest accrued on the loan was added to the loan balance rather than requiring regular interest payments to be made. For the client, this provided two key benefits: Cash Flow Relief: By capitalising the interest, the client was able to redirect their available cash flow to more pressing business concerns, including paying down their $1M tax debt. This approach allowed them to stabilise their financial situation without the immediate strain of servicing both the tax debt and the loan simultaneously. Flexibility for the Future: The capitalised interest approach also created breathing space for the business to recover from its pandemic-related losses. By the time the interest needs to be repaid, the business is expected to be on even firmer financial ground, with stronger cash flow and better financials. This would enable them to refinance the loan or even explore unsecured lending options once their financial situation improves. Why This Loan Was the Right Fit In this case, the combination of a first mortgage loan with capitalised interest was crucial in allowing the business to address its immediate challenges while providing room for future growth. Here’s why this was the ideal solution: Secured Loan with Lower Interest Rates: By securing the loan against property, the business was able to access a loan with a lower interest rate than would have been possible with an unsecured loan. This ensured that the overall cost of borrowing was manageable, despite the larger loan amount. Avoiding ATO Enforcement: The capitalisation of interest gave the business the breathing space it needed to focus on paying off its tax debt. This is significant because it helped them avoid any potential enforcement action by the Australian Tax Office (ATO), which could have included garnishing accounts or placing liens on assets. By proactively managing the tax debt, the business was able to maintain control over its financial future. Improved Financial Outlook: The structure of the loan was designed to align with the company’s projected financial recovery. With turnover increasing and cash flow stabilising, the business is expected to be in a much stronger position within a year. At that point, they will be far enough removed from the loss-making pandemic years to consider refinancing the loan or transitioning to an unsecured option with more favourable terms. Key Benefits of This Approach Preserving Cash Flow: Capitalising interest allowed the business to preserve its cash flow for day-to-day operations and critical payments like tax obligations, which was vital to its continued operation and recovery. Future Flexibility: This strategy provided the client with a clear pathway to financial recovery. After one year, the business could refinance the loan under more favourable terms or secure unsecured financing once they’ve demonstrated improved financials. Tailored Solution for Unique Challenges: This loan was structured with the unique challenges of the business in mind. The post-COVID recovery created an opportunity for growth, but also highlighted the need for a financing solution that wouldn’t strain the business’s resources. A first mortgage, combined with capitalised interest, was the perfect balance between providing necessary capital while keeping short-term obligations low. Strategic Debt Management: By choosing consolidation over restructuring, the business retained full control over its operations while addressing its debt obligations. This solution also ensured that their tax debt was managed, reducing the risk of future penalties or enforcement action. In conclusion, this case study demonstrates how a strategically structured loan – even a secured one – can create substantial value for a business, especially when navigating a post-crisis recovery. At Dark Horse Financial, we understand the need for tailored financial solutions that don’t just solve problems but also enable businesses to thrive in the long term. Related posts: Case Study: An Unsecured Business Line of Credit Can you consolidate your business debts? (A Case Study) Increase Supply Chain Efficiency with Trade Finance Case Study: $75k Overdraft Limit + $40k Capital Raise Secured Against Equipment (No Property Security)

30 September 2024

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Financing for Doctors: Medical Business Loans, Personal Loans, and more

Key Takeaways Doctors are considered low-risk borrowers by many lenders. Thus they have access to a wide range of financing options with competitive interest rates, flexible terms, and high loan amounts to support both business and personal financial needs. Some reasons why doctors need loans include purchasing commercial property, purchasing equipment, securing working capital, debt consolidation, further education, and more. Medical business loans are versatile loan products that can cover a range of business expenses, including staffing, marketing, and emergency expenses. Medical practice loans are ideal for doctors looking to acquire, expand, or renovate a medical practice. Medical equipment loans are for purchasing or leasing medical equipment, and helping doctors stay up-to-date with the latest technology without draining working capital. Doctors can access personal loans for managing personal expenses, debt consolidation, home improvements, or continuing education. As a medical professional, assess your needs and carefully compare lenders before committing to a loan. Doctors face unique financial needs, whether they are setting up their medical practice, expanding it, or purchasing new equipment. Fortunately, various tailored financing options are available to healthcare professionals. Understanding these loan types can help you secure the right kind of funding for your medical business or personal financial goals. Let’s explore the types of loans for doctors, including medical business loans, medical equipment loans, and more. Get a quote Why Doctors Need Financing Doctors often need financing for a variety of reasons, both for professional and personal needs. Some of the most common reasons include: Starting a New Practice: Setting up a new medical practice involves significant upfront costs, including leasing office space, purchasing equipment, and hiring staff. Financing helps cover these initial expenses. Expanding or Renovating a Practice: As patient numbers grow, doctors may need additional space, more advanced technology, or enhanced facilities, which require substantial capital. Purchasing Medical Equipment: Medical equipment, such as diagnostic machines, surgical tools, or patient management software, can be expensive. Equipment loans allow doctors to finance these purchases without depleting their cash reserves. Practice Acquisition: Many doctors buy existing practices or partner with other healthcare providers, which often requires financing for the acquisition costs. Working Capital Needs: Running a medical practice involves ongoing expenses like payroll, utilities, and supplies. Financing helps ensure smooth cash flow, especially during periods of irregular income. Debt Consolidation: Personal or business debts can be consolidated through loans with lower interest rates, helping doctors manage their finances more effectively. Continuing Education or Certifications: Doctors often need to pursue ongoing education to stay current in their field. Financing helps cover the cost of courses, certifications, or attending professional conferences. Types of Loans for Doctors Doctors in Australia can access a number of loans to address their needs, whether for their practice or for personal purposes. Here are the most common ones: 1. Medical Business Loans Medical professionals can explore general business loans for any needs concerning their medical business. These loans can cover common costs like working capital, inventory purchases, marketing, hiring, and more. Types of Business Loans for Doctors: Secured Business Loans: Doctors can opt for secured loan options for any business purpose. If you need long-term financing and have significant assets to use as security, you can go for a secured loan. This is best for more significant costs like business expansion. Unsecured Business Loans: If you need a quick source of funding with minimal requirements, you can go for unsecured business loans. These loans are more short-term and can be approved as fast as 24 hours. Business Line of Credit: A renewing line of credit can help doctors manage the daily operations of their business, including paying for payroll, utilities, emergencies, and more. A line of credit has a predetermined limit you can draw from at any time. When you repay, the limit resets. You only need to pay interest on the borrowed amount, not the full limit. 2. Medical Practice Loans If you’re focused on the specific needs of starting or expanding a medical practice, you can go for specific loans that address those needs. Medical practice loans help doctors acquire or upgrade their practice with minimal hassle. Why Opt for a Medical Practice Loan? Whether you’re buying into an existing practice or establishing your own, the upfront costs can be significant. Medical practice loans are tailored to help doctors cover costs like: Purchasing Property: If you’re starting from scratch, the cost of a commercial or office space can be your biggest expense. The right loan can cover this cost. Acquiring an Existing Practice: If you’re buying an existing practice, it requires significant capital to do so. Medical practice loans can cover the purchase price. Renovations and upgrades: If your practice needs modernisation or expansion, these loans provide the necessary funding. Common Types of Loans for Acquiring and Upgrading a Medical Practice Commercial Property Loans: Medical professionals can access commercial property loans for the specific purpose of buying commercial space for their practice. These loans can cover the purchase or building of a commercial space. Fitout Finance: These are loans tailored specifically for the improvement of a space’s interiors, including electrical, plumbing, lighting, structural, and interior design. 3. Medical Equipment Loans The medical field is technology-driven, and keeping up with new advancements can be expensive. That’s where medical equipment loans come in. These loans help doctors finance the purchase or lease of medical equipment without depleting their working capital. What Is Equipment Finance? Equipment loans are designed specifically for the purchase of business equipment. For healthcare professionals, this type of financing is used to purchase advanced medical technology and equipment. These loans allow doctors to spread the cost of expensive machinery, diagnostic tools, or even general practice equipment over time. Benefits of Medical Equipment Loans Get Immediate Access to Equipment: With equipment finance, doctors can get medical equipment immediately, allowing them to provide better patient services sooner. Preserve Working Capital: Instead of paying for equipment upfront, you can spread the cost over a fixed period. 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25 September 2024