A company’s need for cash can rear its head at any stage. In the very beginning a business may need finance or a business loan to assist with the start up costs; when a company begins to grow, capital may be required to assist in the fulfilment of the increase in orders and even when a director/shareholder is considering his/her exit plan there may be a requirement for additional funding.
Even the most dedicated company directors will one day have to consider retirement and choose to step away from the business. However, when the director is also the sole shareholder this can often be a more complicated scenario.
Business loan needed to bridge a sale
We were recently approached by the director of a large removals company who had taken the decision to retire from the company. He was the sole shareholder of the company and the business was valued at a significant amount. After 12 months of poor trading and substantial efforts to try to turn results around, the director decided that it was time for him to realise the value in his shares.
The director successfully found a purchaser. Unfortunately, due to the recent reduced trading activity, which was thought to be a minor blip in results, the company was suffering from a cash flow shortage. The director held a sale contract agreed by both parties but was well aware that with the bank overdraft reaching its upper limits, there was a danger that the goodwill could be affected if the obligations of the business were not upheld.
Poor trading results can be accommodated by alternative lenders
The overall situation, specifically the recent trading results, made it difficult for the director to obtain funding from the traditional lenders. As a result, the director decided to contact Cashsolv for business finance.
Cashsolv undertook a review of the company and the terms of the impending business sale. We recognised that the company was currently trading at a loss but we also confirmed that the business sale was imminent and credible. The sale was intended to be completed within 3 months and working with the purchaser it was agreed that the business loan could be repaid as part of the sale proceeds. We therefore proceeded to lend funds of £250k to support the company so that the ongoing business would not be affected before the sale could be concluded.
The sale eventually concluded in line with the directors expectations. The director has maximised the return from the sale by keeping the company buoyant whilst it was being sold. This has prevented the purchaser from having to amend the sales terms, saving any reduction in the consideration being offered.
At Cashsolv we understand that every situation is unique and that even a loss making business can sometimes still be an acceptable borrower for a business loan. We pride ourselves in having the commercial sense to see the bigger picture and offer realistic solutions to often troublesome issues.
For further information Download our Guidance Paper on 'How short term business loans can help your business finance problems', or view the following relevant pages:
- Business loans
- A guide to Short term business loans
- Emergency business loans
- Emergency business loan - why not use a bank
- A guide to Small Business Loans
- How quick business loans can encourage business turnaround
- How to get a quick business loan
- The pros and cons of secured business loans
- How to make business finance work for you
- A case study: How we helped a recruitment firm invest for growth
- A case study: Quick business loans could be the answer
- Business loan calculator
- Construction Finance