Insights into the work of a specialist broker and what it takes to get you an approval!

Packaging a deal well for credit submission can make a huge difference to its approval success! And what we do as commercial brokers is often more than meets the eye.

When this deal was referred to me, I could clearly see the potential of such a dynamic business. The biggest challenge is to ensure a lender and their credit team is convinced. More importantly, they are comfortable because they are humans too!

“Seeing potential vs ability to realise potential is key to an approval”.

Upon speaking to the executive team behind the business I realised I have met some of the most dynamic people that knew what they were doing. Which explains how the business went from $4M in FY22 to $21M in FY23.

People say, you can always judge a man’s character by his garage. This client’s pride and joy is a Mazda RX7. Someone who works hard in building their business, unafraid to take the necessary risks and make strategic decisions to have his business performing at its peak.

However, even a business with great potential is not perfect. Every lender will focus on risk and it is our job to mitigate this before they get too uncomfortable to approve a loan. Even worse, they have made up their minds to reject the deal.

Here is a high level of what I saw at a consolidated level between two companies in this deal…

Working against the client:

• Tax debt $1M
• Lumpy revenue deposits
• High volume inter-company transfers
• $2M secured debt with major bank leveraging up to 80% LVR across all properties.
• Receivables exposure over 90% to a single client
• Net loss $2M in company A

Working for the client:

• Appointed as a global tech partner for a public listed client.
• Completed $40M worth of contracts with this global client.
• Secured $30M contracts with additional $40M to be finalised by December 2023
• Over $3.2M in current receivables
• Asset backed client
• Net profit $4M+ in company B

Foreseen cashflow challenges:

• Increasing operational overheads
• $1M payables with no trade finance facility in place
• $3M+ receivables with no debtor finance facility in place
• $500K+ in available cashflow – reducing

Unfortunately, this client would not suit many cashflow lender policy. I had to work with one that take a holistic view of the overall business and it’s potential.

The real question then lies in:

• Who (which lender) will look at this client holistically into the future and help support their growth?
• What would they want, like or need to see in this client to support a loan approval now? What can the client offer credit team for further comfort?
• Why would they want to build a long-term relationship with this client into the future?

It took me 2 weeks to carefully package a submission with the client ensuring all our ducks are in a row. Covering all angles and mitigating all the potential credit questions ahead of time supported with strong evidence. Making the client look good! During this time, our engagement with the credit team prior to formal submission enabled us to gauge the direction and comfort levels of the lender.

“A strong and detailed narrative will help present a good proposition for lenders to consider covering risk mitigants and ROI.”

Once submitted, we had provided the lender with confidence and optimistic vision of the business with further comfort to approve the loan.

It took 4 days to a conditional approval, total 6 days to settlement. DONE!

Solution:

• Delivered $750K working capital loan to support current cashflow requirements.

Work in progress:

• $1M-2M trade finance facility
• $1M-$2M debtor finance facility – currently unqualified
  • Sqale Finance is working with debtor finance veterans and client to develop new processes that can be adopted by the client based on their industry best practices to enable debtor finance product.

This is the value of a brokerage with an advisory approach backed by experience. It’s more than just delivering a loan. It’s supporting self-employed clients deliver success in both profits and growth into the future.

If you are a mortgage broker or accountant who would like to learn more. Contact us at Sqale admin@sqale.au. If you are a business owner looking for genuine support to help you finance your growth, let’s chat.