A South West based recruitment company was introduced to Genie Lending by their accountant about 18 months ago. The company, being well established, had enjoyed a productive relationship with their mainstream banker. They had previously benefited from a debenture led overdraft facility of £150,000 which had always worked for them. A change of bank manager in 2009, immediately post crash, saw the company being forced, in effect, to migrate their funding structure to the bank’s inhouse factoring company. Whilst this promised flexibility at a low cost, practically speaking what started as a constructive way to fund the business, soon turned into a highly inflexible and costly way of the company being financed.
When Genie Lending was introduced, the company was seeking an alternative to this form of funding. Our finance manager was immediately able to deliver a selective invoice discounting package which enabled the client to regain control of and manage their own debtor book/client base and choose which invoices they needed to discount on a day to day basis, all within a non-contractual environment. They could literally dip in and out of a highly flexible funding arrangement as it suited the company’s daily needs. The cost base was also much diminished.
Then 15 months into that arrangement, the company had an opportunity to acquire a competitor business which would enable them to ramp up their business. The company returned to Genie Lending as they needed to raise £185,000 to cover the balance of the purchase price.
Genie’s Approach to Bespoke Finance
A 2 pronged approach was necessary in this instance. First, a Peer to Peer funder provided an unsecured loan over 5 years in the sum of £75,000. Secondly, a highly innovative funding structure was used which enabled the balancing £110,000 to be raised. This was driven by the inherent value of the company’s debtor book which, when insured, allowed for a 3 year loan structure to be put in place in the sum of £200,000. This provided the £110,000 required to make good the purchase price in the acquisition and also the working capital advance that would normally have been released from the selective invoice discounting arrangement originally employed. This 3 year structure was on an interest only basis with a bullet repayment at the end of the term. Importantly, it also allowed for future negotiated loan advances to be made on the same basis should the company’s working capital needs increase as a consequence of the uplift in business forecast post acquisition. The fact that the second facility could be done without the need for director’s Personal Guarantees was also hugely attractive!
Both facilities have now bedded down and the company is actively seeking further acquisitions which Genie Lending will be here to assist with.