This Summer, we are sharing real examples of how we have transformed the financial outcomes for clients facing a wide range of different challenges.
Read on to discover how we helped a client understand the potentially disastrous consequences of an expensive business loan they had secured independently, instead finding a solution that ensures the future viability of their business.
What problem was the client facing?
A business owner approached us seeking approximately £160,000 in funding. Because of the company’s recent trading performance, obtaining that amount on sustainable terms was challenging.
An offer for the full £160,000 was available, and its monthly repayments initially appeared manageable. However, the total amount repayable over five years would have been approximately £469,000 – around £309,000 more than the sum borrowed. That would have taken roughly £62,000 from the company’s profits each year.
What had they tried themselves?
The owner and the company’s bookkeeper had assessed the proposed funding by looking at monthly repayments. They were entirely focused on the immediate viability of their business, so their priority was securing the funding. They had not considered the total amount repayable. This meant that the full cost of the loan and its longer-term effect on profitability had not been fully recognised.
What solution did we find?
We encouraged the client to look beyond the headline funding figure and monthly payment. We demonstrated how the total amount repayable would effectively absorb the company’s profits for several years and make it much harder to obtain better finance in the future.
As an alternative, we secured a competitive £75,000 loan at approximately 12%, which was a good option given the business’s trading circumstances. This provided the essential funding needed in the short term, without placing an unsustainable longer-term burden on the company.
What changed for the client?
The business obtained the funding it needed while avoiding an option that could have undermined its financial future.
The more proportionate loan gives the company room to trade profitably and produce stronger accounts. Once that improved performance is visible, we can help the business seek further funding on more favourable terms.
We clearly added value in finding a loan at reasonable terms. However, the role we played in protecting the client from the potentially damaging consequences of taking the wrong loan was vital to ensure their long-term viability.