Cliff was the owner of a successful family business turning over in excess of $1,500,000 annually.
His assets included a commercial property valued at $2,000,000 plus equipment of $1,800,000. Cliff’s personal assets were valued at around $1,500,000. This was some $5,000,000 plus of tangible assets! He also wanted to borrow an extra $700,000.
Cliff engaged us to negotiate this finance for him. After researching his arrangements with his bank, we found –
Cliff’s total borrowings were $1,000,000 with repayments being some $20,000 monthly.
The existing lender had the following securities against this $1,000,000 loan:
An unlimited personal guarantee from Cliff
1st mortgage security over the commercial property
18 individual pieces of equipment registered on the PPSR (Personal Property Securities Register)
Cliff wasn’t very happy about this situation. He wanted –
His residential property to be mortgage free with no securities registered against it
To structure repayments so they helped the cashflow requirements of his company
To get rid of all unnecessary securities on the PSSR
Limit his personal guarantee
We were able to present Cliff with 2 very competitive offers (one from his existing bank!) Cliff decided to stay with his existing bank under the new “renegotiated” terms –
Cliff borrowed $1,700,000 over a 15 year term. $1,300,000 of this amount was set on a principal & interest schedule, but the balance remained interest only. This meant he had $400,000 that he could draw down and repay as and when his business required.
Cliff’s securities reduced to-
1st mortgage security over the commercial property, to a priority value of $2,000,000
Personal guarantee from our client, limited to a priority value of $2,000,000.
His existing lender discounted the early repayment charge to $5,000.
On top of this, Cliff was now paying some $8,000 per month LESS in repayments, than he had been.
Don’t ever assume you’ve got the best deal with your bank. It pays to take a good look at your arrangements from time to time. And it pays to have someone else “go to bat” for you with your bank!
(Names and details have been changed to protect client confidentiality.)