Securing funds as a first time small business owner.

Industry: Manufacturing/ Building & Construction

Loan Amount: $2,000,000

Referrer: Mortgage Broker

Client: First-time business owner

Brad was a high flying engineer working off-shore, who was keen to purchase his own business closer to home in south-east Queensland. After a long search, he found a kitchen cabinetry business that was suitable and contacted his existing mortgage broker to assist with the finance. His mortgage broker was quick to realise that this type of transaction needed the assistance of an experienced commercial finance broker and referred it to Arete Finance.

“I’m often approached by people just like Brad who want to move on from being a PAYG employee to owning their own business. While it’s feasible to raise finance against the assets and cashflows of an existing business, it becomes difficult when the buyer hasn’t had any prior experience with operating a business in the industry they’re looking to purchase in”.

“The first question I get asked by all banks and lenders is, ‘what experience has the buyer had in running this type of business?’ And if we can’t get the lender comfortable with the answer, they just won’t proceed any further”.

In Brad’s situation, we were able to present a strong case backed by a sound business plan, detailed cashflow forecasting and a credit proposal that mitigated all the potential risks.

Despite this, we faced a set back through the process with a major bank advising of a shortfall in security values which jeopardised the entire purchase at the final stages. Contracts had been executed, deposits paid and Brad was moments away from officially resigning.

We had to re-look at our options, and came up with an alternative.

As the business raised invoices with terms provided to their customers, we were able to set up an invoice finance facility, which the business could use for its ongoing working capital needs. We also had the option of vendor finance.

In the end we got the deal done by using 3 different lenders and 4 different types of finance. There was term debt secured by property, invoice finance, equipment finance and vendor finance.

“Daniel was really personable and is a great bloke. He took the information I had and made the process really straightforward. While I know he was very detailed in his proposals to the banks, he took away all that stress. I’m pleased with the result.” Brad said.

Subsequently, Brad contacted Arete Finance to assist with further finance requirements including $150,000 of equipment to help grow the business. And together they’re planning a review of the business’s existing finance to ensure his lenders are providing him with the best value in the market.

If you are looking to acquire a business talk to Daniel at Arete Finance about what strategies you need to have in place to get the deal done.