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Case study: Refinancing a business

 

 

 

 

 

 

Does your business need refinancing or restructuring? As this tale of a business with urgent liquidity problems shows, having a credit adviser managing the project can be the key to success.

When a cotton grower in central Australia lost his financier during a period of aggressive expansion, he was facing a liquidity crisis and approached an accredited equipment and commercial credit adviser for help restructuring the business and securing a new backer.

His current financier was shutting down its operations across the state. Not only had he lost his account manager, he had also lost his whole direct line of resources to his business, right at a critical time..

It was quite a complex business. It had multiple entities with multiple assets and private investors, and had a lot of moving parts in addition to the expansion plans. So there was a lot of due diligence and lot of work in terms of understanding the client’s current business structure and requirements, and creating the structure that would be required going forward to satisfy all parties, including new banks.

Before putting the business out to tender, the credit adviser and his client worked on creating cost efficiencies and were able to turn a critical situation into a foundation for growth.

They went through that process, which took quite a few months, and then took it out to tender. They worked with one particular financier who had the strongest EOI towards the proposition, and took it all the way through to settlement. On the back of that settlement, not only did he have the initial funds for expansion, but also significant cash flow and cost savings. They saved him more than $100,000 in interest, and with the restructuring of six facilities, they managed to free up an additional $250,000 worth of cash flow into the business, which dropped to the bottom line.

The credit adviser was also able to negotiate waivers on $50,000 worth of financing costs.

There were quite material economic savings for the business, which flowed straight to profitability, and solved the liquidity crisis that the client was experiencing.

Having an accredited credit adviser on side to help you build your business could be key to your success. If you are thinking of refinancing your business, talk to a Zenith Advisor today, to see what options you may have.

The case study was provided by Ian Robinson, Wagga Wagga, NSW.

 

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