Commercial Finance Brokers (UK) (CFBUK) was approached by a client who, along with three fellow directors, wished to make an acquisition of a competitor. The deal consisted of £350,000 for goodwill, assets and stock at value as well as £300,000 for a freehold factory unit. The purchasers had £100,000 in cash and therefore needed to raise £550,000. They had been rejected by their own bank and were disappointed when the first broker they approached failed to come up with an offer of finance.

CFBUK rose to this challenge and helped the client to raise the funds required using their expertise and knowledge of the market.

The first job was to speak to those lenders who CFBUK knew, based on their experience, would have an appetite for such a proposal. An 80% business mortgage was agreed on the factory, worth £240,000 and machinery was sold for £80,000 and leased back to the company. Further finance was raised via invoice discounting to the tune of £60,000. This, along with £50,000 cash at bank and an increase of £20,000 in the client’s overdraft left a shortfall of just £100,000.

Each of the four directors raised £25,000 by re-mortgaging their home and making a director’s loan to the company. This covered the shortfall of £100,000 and the purchase was achieved within just eight weeks of their bank’s rejection.

An independent financial advisor (IFA) earned £2,700 for processing the residential mortgages and £7,200 for securing term assurance (worth £300,000 for each of the four directors). The IFA was paid £1,425 by CFBUK from our total fee of £3,562.50. In all the deal cost just 2.45% of the funds raised. The IFA paid for lunch!

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