85% Funding To Help Buy A Restaurant
We’re continuing our series of blogs, where I’m telling the stories behind some of the recent deals we’ve done.
They’ll give you an insight into the types of funding we can arrange, and help you understand some of the imaginative ways in which we’ve assisted our clients get business finance.
This week, we’re looking at clients, highly experienced in the catering trade, who were looking to acquire a new restaurant.
However, they had limited cash resources to put into the deal and were struggling to raise finance.
What could we do to help?
So, 85% funding required to help our clients acquire a restaurant. Here’s what happened……
The Background To The Deal
- Our clients, were a husband and wife team with considerable experience in the catering trade, who now had the chance to acquire a freehold restaurant in the North of England.
- It was an excellent business opportunity, and our clients had a number of plans for developing the business further and thus increasing the trade.
- However, they had a requirement for 85% of the purchase price.
- Could we help?
What Were The Problems?
There was one crucial problem:
- Our clients had limited cash resources available to put towards the purchase price of £420,000.
- They had already approached several lenders including their own bank who could assist but only up to a maximum of 70 – 75% of purchase price.
- However, these options were unworkable because our clients needed a loan of £357,000 – in other words 85% of the purchase price.
- They knew it was a very profitable business with huge potential to grow and expand, however because they hadn’t been able to raise the funding, they were starting to give up hope.
- That’s when their accountant introduced them to us.
How Did We Solve the Problems?
- Having had the introduction, the first thing we did was meet our clients. We call this meeting our DEEP DIVE EVALUATION and is arguably the most important thing we do.
- During that initial meeting we take the time to completely understand our clients funding requirements and as a result suggest possible solutions.
- In this instance, having fully understood our clients funding requirements; we restructured their deal.
- We were able to negotiate a split funding arrangement with a lender, whereby the lender provided a loan of £294,000 (i.e. 70%) over a 15-year term.
- We then negotiated with the lender to provide the balance of the loan requirement of £63,000 over a 5-year term.
- This meant the two loans (£294,000 and £63,000) totaled £357,000 – in other words 85% of the purchase price!
What Were The Benefits To Our Client?
- Our clients had approached several lenders including their own bank who had indicated the maximum loan they would consider would be 75% of the purchase price – in other words £315,000.
- This was unworkable for our clients based on their cash availability, because without the 85% funding option they could not proceed with the purchase.
- The key benefit we offered our client was a “fresh pair of eyes” and a little imagination!
- As a result, we structured the deal in a way that worked for the client.
- But it also worked for the lender, because we were able to structure the more “risky top slice” funding over a shorter term.
- The result? A total loan of £357,000 – 85% of the purchase price.
- Exactly what our clients needed!
- It is vital clients have access to alternative sources of finance.
- In this instance, a fresh look at the deal and a close relationship with the lender we approached made the difference between success and failure.
- The result was our clients got the 85% funding they needed
- DEAL DONE!
Result? Very happy clients who are loving running their new restaurant!!