Key Learnings and case study of the Week 25.03.2024

Last week a business loan settled for a customer who made a business acquisition for a retail flooring business which also offers installation services. Currently the customer has been operating a flooring installation business for a number of years. The rationale is that its effectively a bolt on acquisition which will generate strong synergies for my customer.

The size of the loan wasn't big as the total cost of the business purchase is less than $ 200K, however the payback period is less than 1 < year as the vendor looks towards retirement and stepping away from the business completely.  What I can see with this customer is that it will be a strong growing customer with strong CAPEX needs as well as home loan lending opportunities. 

Even though the finance request may initially be small, there are certain type of customers that you want to support given their strong Character (4C credit), the growth phrase to where they are which brings future lending opportunities. 

Some brokers may walk away from this business loan opportunity as the funding request is too small. Others may take short cuts and to do it as a personal loan or to put it with cash flow funders who will charge 20-30% per annum with aggressive amortization terms. In this case, doing it as a personal loan will be difficult as individual financials position are not strong and the numbers will not service. It will be difficult to justify putting this with a cash flow funder given they are at a growth phrase where cash flow/ working capital position is tight. This type of business will likely to fall over if they put on a tight amortization term and at unaffordable interest rates. 

I selected a major bank for this request and being in the Premium broker business team, the turnaround time is normally a lot shorter once all the information is provided. 

Big or small- credit is credit and the same level of work is required to ensure that this funding request goes through. I structured

• 12 months forecast for customer- obviously assumptions are provided by them

• Detailed credit memo explaining customer's background and the funding request

• In the memo, addressing foreseeable questions which may be asked by credit.  

There were no questions asked by credit and deal was approved and several days later, settlement occurred. Customer than gave me a strong review on google review :0 

Well put together quality submissions bring quick and strong results. What you put in is what you will get out 

Keith Ho  MAF, B.BFin

Director

Ho Finance- Finance Made Simple

Australia & New Zealand

LVL G/575 Bourke Street

Melbourne Victoria 3000

Australia

E:  [email protected]

M: 0457 451 107