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 finance broker on your team 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 MFAA Accredited Finance Broker 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’d also lost his whole direct line of resources to his business, right at a critical time,” explains the finance broker .

“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 finance broker  and his client worked on creating cost efficiencies and were able to turn a critical situation into a foundation for growth.

“We went through that process, which took quite a few months, and then took it out to tender. We worked with one particular financier who had the strongest EOI towards the proposition, and took it all the way through to settlement,” says the finance broker.

“On the back of that settlement, not only did he have the initial funds for expansion, but also significant cash flow and cost savings. We saved him more than $100,000 in interest, and with the restructuring of six facilities we managed to free up an additional $250,000 worth of cash flow into the business, which dropped to the bottom line.”

The finance broker 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 also solved the liquidity crisis that the client was experiencing.”