Case Study: Equity gaps (and not the family home)

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Our client, a labour hire business providing contractors to the mining sector, was regularly using close to $1M to cashflow the business until their invoices were paid. In practical terms this represented their limits of self funding meaning they could not pitch for more busine

Ideally requiring a $1M facility with the potential to grow to $2M we assisted the client obtain a letter of offer for a competitively priced debtor finance facility. But, with home loan rates under 2% and debtor finance rates starting at 5.5%, their accountant advised them to borrow against their home in the short term and later seek the facility once they had exhausted the equity in their home.

The accountant’s advice did not work for the client. Firstly, their preference was not to use their family home to secure business finance. Secondly they only had $300,000 of available equity in the home which was not going to be enough. Given the debtor finance facility could provide the credit immediately and grow as they went after more business, they kept the family home off the table and went with the debtor finance.

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